Bitcoin plunges amid continued market sell-off

Leading cryptocurrency Bitcoin approaches two-month low and falls below $50,000

Bitcoin suffered its second significant plunge in less than a week on Friday, falling below $50,000 for the first time since early March.

The world’s leading cryptocurrency was already in the midst of a price correction, having reached a new all-time high of $64,788 in the run up to Coinbase’s direct listing earlier this month.

Reports that US president Joe Biden will announce an increase in long-term capital gains tax for the wealthiest Americans from 23.8% to 43.4%, including a surtax,  jolted investor sentiment. All three leading US indexes closed on Thursday down 0.9%.

Bitcoin has a history of dipping in the immediate aftermath of market shocks but its latest plunge is thought to have been particularly severe as the tax hike could directly affect the profitability of cryptocurrency trading. Under current US tax laws, the sale of cryptocurrencies is considered a "taxable event".

Others have argued that the increasingly redistributive approach to taxation by the US government may well prove to be a long-term boon, driving the adoption of decentralised mediums of exchange further from state control.

This sentiment was expressed by billionaire Tim Draper, who took to social media to state: “The antidote for oppressive government and runaway taxes is… #Bitcoin.”

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The plunge has thus far wiped more than $170m (£122m, €141m) off the total cryptocurrency market capitalisation, with more than $3bn worth of positions thought to have been liquidated as a result. Smaller coins suffered more severe corrections. By mid-morning, XRP, Litecoin and Bitcoin Cash traded down by 15.5%, 15.8% and 14.7% respectively.

Ethereum, which had set a new all-time high of $2,643 on Thursday, traded down by 6.4% at $2,263.90.

Bitcoin stood 4.4% lower at $49,283. Although trading almost a third below its recent record high, the cryptocurrency has nonetheless gained 70% since the start of the year.

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