Bitcoin loses the $20,000 level after the new US President’s decisions
In an official presentation of the proposed budget for fiscal year 2024, US President Joe Biden called for eliminating tax subsidies for cryptocurrency investors, real estate businesses, and the oil and gas sector.
Speaking of federal finances, Biden made his inaugural proposal Thursday by outlining a federal budget that would reduce the deficit by about $5.5 trillion over the next 10 years.
Biden’s budget targets cryptocurrency:
According to the White House, the new budget will provide an estimated $24 billion in savings by eliminating a tax subsidy for cryptocurrency investors.
Known as the “tax loss harvesting strategy,” this subsidy gave investors the ability to sell any cryptocurrency at a loss and incur a tax loss to reduce the tax burden, while providing the possibility for investors to buy back the same cryptocurrency the next day.
This lowers the taxable income of the investor and thus evades the tax burden.
While this method is traditionally used in the stock market, harvesting tax losses is quite applicable to cryptocurrency investments.
Cryptocurrency investors can benefit from tax loss harvesting by carefully managing their portfolios and tactfully selling their unprofitable holdings, thus reducing their taxable income and keeping more of their profits.
The Internal Revenue Service (IRS) was aware of this loophole and therefore issued multiple warnings to investors to discourage them from engaging in the practice of selling digital assets at a loss and then buying them back.
More trouble for the bitcoin price?
In a similar way to eliminating the cryptocurrency tax subsidy, Biden’s budget removes a tax loophole for real estate investors as well.
Earlier, real estate investors were able to defer paying taxes on profits from deals for an indefinite period as long as they continued to invest in residential or other commercial properties.
According to the White House, this measure will result in savings of approximately $19 billion.
Additionally — which comes as a surprise to many — President Biden has imposed a 30% tax on all electricity used to mine bitcoin and other cryptocurrencies.
Bitcoin price took a big hit as a result of this goodness and is currently trading below the $20k level which is a drop of 8% over the past 24 hours, compared to a drop of 11% over the past 7 days.
The fact that market participants are selling their holdings in preparation for the implementation of the new budget can be felt across the broader crypto market.
Not only Bitcoin, but the majority of the leading altcoins like Ethereum, Ripple, and Polygon are also recording significant losses at the time of writing this article.
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