The price of bitcoin temporarily dropped below the psychologically important $50,000 level on Friday, putting the digital asset on track for its worst weekly performance since March, as traders appeared unable to shake worries over a potential rise in the U.S. capital-gains tax rate for wealthy investors.
Bitcoin BTCUSD, -0.91% closed at $50,619.83 at 5 p.m. Eastern Friday, after trading below $48,000 to touch a level last seen in early March, according to CoinDesk. The digital asset fell 18.3% for the week, its biggest such fall since the week ended March 13, 2020, according to Dow Jones Market Data Group.
The losses for bitcoin represent around a 21% drop from a recent peak of $64,829 for the cryptocurrency. A 20% drop meets the widely accepted definition of a bear market. Bitcoin saw a sharp slide last weekend, though the cryptocurrency’s volatility mean slides of more than 10% are not unusual. Fears of increased regulation were at the heart of last Sunday’s pullback.
Friday’s losses come on the heels of a more-than 300-point loss for the Dow industrials DJIA, +0.67% after a media report that President Joe Biden is weighing a plan to nearly double capital-gains tax on the wealthy.
Stocks, however, bounced back on Friday, with the S&P 500 SPX, +1.09% flirting with record territory and the Dow rising more than 300 points.
“It is clear that Bitcoin is more sensitive to capital-gains tax threats than most ‘asset’ classes. The threat of regulation, either directly in developed markets or indirectly via the taxman, has always been crypto’s Achilles’ heel, in my opinion,” said Jeffrey Halley, senior market analyst at Oanda, to clients in a note.
Halley said the next bitcoin level he’s watching out for is $42,000, which “might come this weekend, or next week or perhaps not at all.”
“Hopefully, we will hear as many ‘experts’ saying this is a sign of bitcoin becoming a ‘maturing mainstream asset’ if it falls 10% this weekend, as we do when it rises, or a crypto-exchange chooses to IPO,” he said.
A number of analysts have warned of a near-term downturn for bitcoin as the cryptocurrency has continued to track lower after reaching an all-time peak above $64,000 following the direct listing of cryptocurrency platform Coinbase COIN, -0.63%.