Bitcoin slides below $50,000 with $260 billion wiped off the crypto market as Biden’s tax proposals crush risk appetite

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Bitcoin slid below $50,000 on Friday, extending losses for a seventh day in a row, while simultaneous drops in other digital currencies erased $260 billion off the total value of the cryptocurrency market.

The world’s most widely traded digital asset fell 4% to around $49,130, ether fell 7% to around $2,220, Dogecoin fell 17% to $0.17, and XRP dropped 8%.

The crypto market has come under fresh pressure after reports that US President Joe Biden is looking to double the capital gains tax rate on wealthy investors.

Biden’s proposals are aimed at funding expanded childcare and education programs. Federal tax rates, including an existing surtax on investment income, could be as high as 43% for those earning more than $1 million, according to Bloomberg.

The Internal Revenue Service has been executing tax collection on crypto gains. Crypto is taxed as property, not currency. The agency began requiring crypto investors to disclose transactions on their 2019 tax returns, asking whether they “received, sold, sent, exchanged or otherwise acquired any financial interest in any digital currency.”

“It is clear that bitcoin is more sensitive to capital gains tax threats than most ‘asset’ classes,” Jeffrey Halley, a senior market analyst at OANDA, said. “The threat of regulation, either directly in developed markets or indirectly via the taxman, has always been crypto’s Achilles’ heel. Yes, you could store those juicy capital gains offshore as a US citizen, but we know how the G-Man treats tax evaders. It is not pretty.”

JPMorgan warned this week there could be further downside for bitcoin if it fails to climb back above the $60,000-level. Guggenheim’s Scott Minerd also recently said bitcoin could pull back to $20,000 or $30,000 after rising much too fast in a short period of time.

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Robinhood allows people to buy a minimum of 1 Dogecoin instead of 10 after the meme currency’s gains jumped more than 8,700%

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Robinhood said on Tuesday that it would lower its minimum Dogecoin order size to one coin from 10 coins as the meme-based asset’s popularity rises rapidly.

Investors can also place smaller orders of bitcoin and ether, the company said in an update.

“Much happy! Very day! We’ve lowered the minimum order size from 10 $DOGE to 1 $DOGE. You can now build up your doge empire one coin at a time,” Robinhood said in a tweet. “We’ve also lowered the minimum order size for $BTC (0.000001) and $ETH (0.0001) so it’s easier for anybody to invest in crypto.”

Bitcoin’s previous minimum order on the brokerage was 0.0001, while ether’s old minimum was 0.001.

The trading app describes Dogecoin as a “playful take” on cryptocurrencies. “It’s typically used in online communities to ‘tip’ users for content that’s particularly witty or useful. It’s also become a popular cryptocurrency for donating to charities,” Robinhood says of the meme currency.

The digital asset recently hit a peak of $0.41, taking its year-to-date gains to more than 8,700%. But it was trading 21% lower, at $0.30, on Wednesday.

After Dogecoin hit its all-time high, Robinhood experienced a major trading outage that made it impossible for investors to join the rally. That instance mirrored GameStop’s rise in January, when traders were unable to get in on its booming stock as demand skyrocketed.

“Robinhood is a repeat offender here,” said Richard Smith, CEO of the Foundation for the Study of Cycles. “They are trying to be all things to all people. They are like Uber in the early days where their attitude is, ‘Who cares if we break a few things as long as we keep growing engagement.'”

Smith added: “Breaking a few things in the taxi business is one thing. Breaking a few things in the highly regulated retail financial services industry is something else.”

Robinhood said that the interruptions to trading were unacceptable but that heightened interest in crypto could continue to cause service interruptions.

Dogecoin was created as a joke in 2013, based on a meme.

“Whilst it has some limited practicality as a way of micro-tipping posters on internet forums, its rise has probably very much due to personal amusement reasons in the internet meme culture, recently spurred on by a playful Elon Musk on Twitter,” said Alex Joshi, a behavioral-finance specialist at Barclays Private Bank.

Joshi said that when the price of an asset rises so spectacularly in a short period, investors get lured in with the prospect of getting rich quick. “When you add in rapidly growing numbers of people buying because they see everyone else buying and making extraordinary returns, speculative herding behaviour really takes off, leading to vast numbers entering the market at extremely high price levels,” he said.

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Bitcoin’s momentum will end and it will be ugly – regulation will kick in and countries likely won’t ignore its huge carbon footprint, an investment advisor says

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Bitcoin has ushered in a movement hailed by investors for its ability to decentralize the financial system.

But one investment advisor just highlighted two key factors that pose big risks to bitcoin’s momentum: the threat of regulation and its impact on the climate.

The world’s most popular cryptocurrency broke its mini-slump on Wednesday by rising 1% to above $55,000. It tumbled as much as 17% over the weekend, partly driven by an unverified report that said the US Treasury may soon crackdown on financial institutions using digital assets to launder money.

“We’ve got a whiff over the weekend of what could happen if regulation comes to this product – I’m not going to call it an asset class,” Stephen Isaacs, chairman of the investment committee at London-based advisory firm Alvine Capital, told CNBC on Monday.

“I don’t know where it will end, or how it will end, but it will end,” he said. “And when it ends, it will be ugly, because there will be nothing there.”

Isaacs further added that bitcoin’s energy usage will be its downfall “if anybody’s serious about climate change.”

“This is a very dirty product, and it’s getting dirtier by the minute, because the amount of energy that is required to mine additional supply is going up,” he said.

Analysis by Cambridge University shows bitcoin consumes more electricity annually than the whole of Argentina, BBC reported in February. Energy consumption is said to have a linear relationship with its price.

Research by Bank of America shows each $1 billion in inflows is equivalent to the same amount of energy used by 1.2 million cars. Conversely, digital currencies proposed by central banks are believed to not have the same negative impact.

Isaacs said the currency is rising in value because of speculation and a “buy-everything” inflationary environment, but it has no fundamentals, or intrinsic value.

“It’s almost a victim of its own success, that if this product allows the transfer of vast amounts of money between individuals who have complete anonymity, it goes against a whole generation of regulation,” he said.

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Billionaire tech investor Peter Thiel warns bitcoin might serve as a Chinese financial weapon against the US – and says it threatens the dollar

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Peter Thiel.


Peter Thiel, one of Silicon Valley’s most prominent venture capitalists, suggested bitcoin could pose a threat to the US during a virtual seminar held by the Richard Nixon Foundation this week.

“Even though I’m a pro-crypto, pro-bitcoin maximalist person, I do wonder whether at this point bitcoin should also be thought of in part as a Chinese financial weapon against the US,” the PayPal cofounder said. “It threatens fiat money, but it especially threatens the US dollar and China wants to do things to weaken it.”

Thiel, a Facebook board member and cofounder of Palantir Technologies, was expanding on his discussion about China not liking that the US dollar is the world’s preferred reserve currency. He said if China has a long position on bitcoin, then the US should be seeking answers on its stance from a geopolitical perspective.

The Asian economy recently created its own digital currency – a cyber yuan that is controlled by its central bank. Thiel referred to it as a “totalitarian measuring device,” rather than a real cryptocurrency.

The tech billionaire, who publicly supported former President Donald Trump’s 2016 presidential campaign, was joined by former Secretary of State Mike Pompeo and former National Security Adviser Robert O’Brien at the seminar. Their discussion, hosted by the Nixon Foundation’s chief executive, largely focused on big tech issues and US-China relations.

Thiel, known for his controversial views, also criticized Google and Apple for working too closely with China. He called out Google for its work on artificial intelligence, saying that the tech giant was effectively working with the Chinese military, and not the American military, according to a transcript of the event seen by CNBC.

He separately called for tighter scrutiny on Apple “because the whole iPhone supply chain gets made from China.”

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Why Tesla’s decision to accept bitcoin as payment is unlikely to be followed by other companies

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  • The volatility in the market price of bitcoin could present a challenge for e-commerce merchants.
  • That would stop them from following Tesla’s decision to adopt bitcoin as payment for products.
  • Some companies may make the leap, but most are fiscally conservative, We bull’s CEO said.
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Elon Musk announced this week Tesla has begun to accept bitcoin as payment for all models of its cars in the US.

From a transactional perspective, the billionaire’s crypto-related announcements have been game-changing for bitcoin. That is quite evident from statistics showing crypto-related keyword searches on Google such as “invest in bitcoin” and “how to trade crypto” have seen more than a 1,015% jump in search volume since January alone, according to data from Semrush.

But some crypto experts say this is an unstable choice for Tesla and could deter other companies from following. Here are four main factors that make the cryptocurrency an impractical and costly method of payment for corporates.

Volatility

With a market cap that now exceeds $1 trillion, bitcoin has quickly acquired a status of being a digital global store of value and reserve asset. But hourly price fluctuations make it extremely volatile, impractical, and a costly payment method for corporates, according to Megan Kaspar, co-founder of crypto investment firm Magnetic. That makes the currency a “poor medium of exchange” and a risky method of payment. Sudden price fluctuations could negatively impact a customer’s ability to pay in bitcoin, she said.

A fintech expert said Musk’s decision is more like an experiment that will measure potential revenue and client type for his products. This step should be assumed to be one of the automaker’s tests for its payment mechanisms, he said.

“Elon Musk is asking people to buy a depreciating asset (a car) with an appreciating, albeit volatile, asset,” Luke Sully, CEO at treasury fintech specialist Ledgermatic, said. “The underlying price volatility is the most immediate risk for merchants.”

It comes down to how comfortable companies are in accepting a currency that has so much volatility in a single day, Anthony Denier, CEO of Webull, said. “You may see a few companies making the leap, but most companies are fiscally conservative and are not going to jump on a trend like this too quickly,” he said.

High transaction fees

To ensure transactions go through on crypto networks, a customer is usually charged a “mining”, or “network” fee. Now, regardless of the dollar amount transacted, whether carrying a value of $5 or $100, this mining fee is standard for every transaction. The fee varies depending on network demand and currently averages around $20. This element of the payment makes the bitcoin blockchain’s fees unsustainable as a form of payment, according to Kaspar.

The taxman treats bitcoin as property, not currency

The Internal Revenue Service adds another layer of complication for merchants that are taxpayers in the US, because it considers bitcoin to be property, not currency, Eric Christensen, chief payment officer of e-commerce firm Digital River, said. “That means when you accept bitcoin, you register the value of it on the transaction date as the basis of that property. When you sell it, you might see a gain or a loss, all of which must be reported to the IRS.”

Digital wallet regulation is a grey area

A key challenge at this point is there are only a handful of banks globally that are willing to provide stored digital facilities for the merchants they work with, according to Felix Shipkevich, founder of law-firm Shipkevich PLLC. “Regulation of digital wallets is very grey at this point,” he said, adding not many jurisdictions regulate digital wallet usage between merchants and their consumers.

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Cryptocurrency investors tend to be dog lovers, while gold bugs prefer cats, study shows

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  • Crypto holders are more likely to be dog lovers – and gold investors tend to be cat people, a study found.
  • Only about one-fourth of all crypto investors are women, highlighting a massive gender disparity.
  • More gold investors are likely to be married with children, while crypto holders tend to be single.
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Cryptocurrency holders are more likely to be dog-friendly, while those who lean on gold tend to be fans of cats, according to research by crypto exchange Xcoins.

As many as 45% of gold investors were found more likely to own a cat, and about 44% of crypto investors had a tendency to have dogs, data showed.

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Another notable highlight of the research is that only 28% of people that hold crypto are women, confirming the wide belief that the industry is male-dominated – with 72% of them being men. Meanwhile, gold investors are almost evenly split between men and women.

Data published by eEtoro last month showed only 15% of bitcoin traders are women. Although that’s a slight increase from the beginning of 2020, it still highlights the massive gender imbalance in the cryptocurrency world.

Xcoins’ CEO said it was important to bridge the gap between gender groups to facilitate mainstream adoption. “If bitcoin is to succeed in the mainstream, then it needs support from all demographics,” CEO Rob Frye said. “No-one is stopping women from entering, or investing the crypto space, but little is being done to encourage them either.”

Xcoins’ study also found that younger people aged between 16 and 34 are more likely to invest in cryptocurrencies, while those inclined towards gold are older than 34. This highlighted differences in investors’ marital status, showing gold investors are more likely to be married with children, while crypto investors tend to be single with no children.

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Anthony Scaramucci says more companies should hold bitcoin in their balance sheet since the explosion in US money supply is a ‘silent tax on American savers’

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  • Anthony Scaramucci thinks responsible company treasurers have to think about adopting bitcoin.
  • He thinks a deluge of money supply in the US is in fact a “silent tax on American savers.”
  • He said a $1 million price target for bitcoin is likely, but would stick to his earlier prediction of $100,000.
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Hedge fund manager Anthony Scaramucci said in a recent interview more companies should begin to hold bitcoin because a flood of stimulus money in the US is actually a “silent tax on American savers.”

“A responsible CFO, or responsible treasurer, will have to think about other assets to hold as a potential store of value for their companies,” he said on CoinDesk TV.

The latest $1.9 trillion stimulus pumped into the economy, aimed at rescuing struggling families and unemployed Americans, represents 40% more dollar flow in more than two centuries, he said. That, according to the financier, is eroding the value of savings.

An abundance of US dollars theoretically pushes the value of the world’s reserve currency lower.

Scaramucci said the reason he is so bullish on bitcoin is that it’s a “solution” to the dilemma faced by middle and lower income people affected by the end of the Bretton Woods Agreement in 1971. That could mean the digital coin may become the currency of the world unless the US dollar is digitized and is no longer influenced by politicians and policymakers. That needs to happen soon, he said.

His company launched a bitcoin fund in December and filed for a bitcoin ETF last week. He also expects to add an Ethereum-based product in the future.

Scaramucci said a $1 million price target for bitcoin is likely, but would stick to his earlier prediction of $100,000 for now. He said he wanted to avoid getting into trouble with clients for announcing unconvincing predictions because “they’ve grown to think that I am nuts.”

Bitcoin was last trading 1.2% higher at $54,734 on Tuesday and is up 85% year-to-date.

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MicroStrategy CEO Michael Saylor says his casual Twitter exchange with Elon Musk in December prompted Tesla to buy bitcoin

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  • Michael Saylor said his Twitter exchange with Elon Musk might have influenced Tesla’s bitcoin bet.
  • Saylor, the MicroStrategy CEO, told Time that Tesla’s decision was an inflection point for bitcoin.
  • Saylor said it wasn’t “appropriate business decorum” to discuss conversations with another CEO.
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Elon Musk’s Twitter dialogue with MicroStrategy’s CEO, Michael Saylor, influenced Tesla’s decision to invest $1.5 billion in bitcoin, Saylor said in a recent interview with Time magazine.

Late last year, in response to a tweet from Musk with a lewd meme about bitcoin, Saylor said he should do Tesla’s shareholders a “$100 billion favor” by converting the company’s balance sheet from dollars to bitcoin. “Other firms on the S&P 500 would follow your lead & in time it would grow to become a $1 trillion favor,” he said.

Musk asked whether such large transactions were possible. Saylor replied that they were and that he was willing to share his playbook with the Tesla boss.

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A little over a month later, Tesla revealed its biggest bitcoin endorsement to date. It announced that it would invest $1.5 billion in the world’s most popular cryptocurrency and soon accept crypto payments for its products. The automaker used the crypto exchange Coinbase to make its bitcoin purchase, according to The Block.

Saylor called Tesla’s move an “inflection point,” adding that the narrative about belief in bitcoin quickly changed from skepticism to growing acceptance. He said that while it wasn’t “appropriate business decorum” to comment on conversations with a CEO of another public company, their Twitter exchange likely affected Tesla’s decision.

Read more: The CIO of a crypto hedge fund breaks down why bitcoin could rally as high as $400,000 in 2 years – and explains why he’s also bullish on DeFi and NFTs

Saylor pushed back on the idea of bitcoin as an example of irrational investor exuberance, involving enthusiasm about news of price increases.

“If you’re looking for an example of real speculation, it would be people speculating upon whether they can squeeze others in a short squeeze and a small stock, like GameStop,” he said. “Bitcoin is not speculation, OK? Bitcoin is a unique new technology, it’s like the Facebook of money or the Google of money. And it grew from nothing to a trillion dollars in monetary value in 12 years.”

Bitcoin traded flat at $57,380 in early European trading on Monday. It’s up about 95% year-to-date and more than 885% in the past 12 months.

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The world’s largest crypto fund manager is offering new trusts that invest in 5 different cryptocurrencies

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  • Grayscale Investments is offering new trusts that invest in five different cryptocurrencies.
  • The new trusts will invest in Basic Attention and Decentraland tokens, Chainlink, Filecoin, and Livepeer.
  • Investor demand for digital currencies has never been higher, Grayscale CEO Michael Sonnenshein said.
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Digital currency asset manager Grayscale Investments announced Wednesday that it is offering five new investment trusts, bringing its single-asset lineup to 13.

The new trusts are launching into fairly niche segments of the crypto space, with three investing in Chainlink, Filecoin, and Livepeer, which are blockchain-based digital payment systems. One will invest in Ethereum-based Basic Attention tokens, while the fifth will hold coins in the virtual reality platform Decentraland. These trusts are among the first of their kind to solely invest in the digital currencies underlying each investment product.

“Digital currencies have reached an inflection point,” Grayscale CEO Michael Sonnenshein said in a statement. “Investor demand has never been higher, and every day we’re seeing new entrants to what has surely become a bona fide asset class.”

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Decentraland is an Ethereum-based blockchain platform where users can operate VR applications.

Grayscale said all five trusts are open for subscription by eligible individual and institutional accredited investors. The decision to launch them was based on assessment of investor demand and the integrity of each cryptocurrency, Sonnenshein told Bloomberg in an interview. The asset manager’s biggest product is still its $34 billion Grayscale Bitcoin Trust.

The new cryptocurrencies it has chosen have much smaller market values in comparison to bitcoin. Basic Attention tokens are known to track consumers’ time and attention on websites, with the goal of understanding how to efficiently distribute advertising money.

Chainlink runs on the Ethereum blockchain, with a technology that enables delivery of price feeds into decentralized finance applications. Filecoin is a storage service provider that enables anyone to rent spare storage space on their computer, creating a huge source of data storage.

Livepeer is a decentralized video-streaming network for those who wish to add live or in-demand video to their networks. Meanwhile, Decentraland tokens can be used to buy up virtual plots of land and goods and services within its virtual-reality space.

Grayscale said it plans to continue a tradition of creating “novel pathways” for investors to access the opportunities that digital currencies may offer.

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MicroStrategy reveals additional $10 million bitcoin bet, bringing its total holdings close to 100,000 bitcoins

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MicroStrategy has boosted its investment in bitcoin again and now owns almost 100,000 tokens. 

The publicly-traded business intelligence company revealed an additional $10 million bitcoin bet in a filing registered with the Securities and Exchange Commission on Friday.

The company said it bought about 205 bitcoins at an average price of $48,888 per coin, inclusive of fees and expenses.

As of March 5, MicroStrategy holds about 91,065 bitcoins that were purchased for $2.2 billion at an average price of $24,119 per coin. The total value of its bitcoin holding at the time of writing would equate to $4.4 billion.

The price of bitcoin hovered around $48,325 on Friday. Its price has fallen 8% in the past week, alongside rises in bond yields, but is still up 70% year-to-date. “Bitcoin remains highly correlated with bond prices,” said Edward Moya, a senior market analyst at OANDA. “The bond market selloff is showing some signs of stability and that could mean the bitcoin pullback is nearing its end.”

Shares in MicroStrategy are up 64% year-to-date.

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