Bitcoin price drops below $21,000 as Biden unveils new US budget
In a formal presentation of the proposed budget for fiscal year 2024, US President Joe Biden advocated the elimination of tax subsidies for cryptocurrency investors, the real estate industry and the oil and gas sector. In a high-stakes battle over federal finances, Biden laid out his inaugural proposal Thursday by outlining a federal budget that would reduce deficits by nearly $5.5 trillion over the next ten years.
Biden’s budget targets crypto
According to the White House, the new budget will provide an estimated $24 billion in savings by eliminating a tax subsidy for investors in cryptocurrencies. This subsidy or better known as “Tax-loss harvesting strategy
” gave investors the ability to sell any cryptocurrency at a loss and take a tax loss to reduce their tax burden, but the investors could then buy back the same crypto the very next day.
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This reduces the investor’s taxable income and thus the tax burden. While traditionally used in the stock market, tax-loss harvesting is equally applicable to cryptocurrency investments. Crypto investors can capitalize on tax loss harvesting by carefully managing their portfolios and tactfully selling unprofitable holdings, thereby reducing taxable income and retaining more of the income. Despite the Internal Revenue Service (IRS) being aware of this loophole, they issued warnings to investors to discourage them from engaging in the practice of frequently selling digital assets at a loss and then buying them back again.
More trouble for the Bitcoin price?
In a manner analogous to the removal of the tax subsidy for cryptocurrencies, Biden’s budget eliminated a tax loophole for real estate investors as well. Previously, real estate investors were able to defer paying tax on profits from deals indefinitely as long as they continued to invest in other residential or commercial properties. According to the White House, this action will result in a saving of around 19 billion dollars.
The price of Bitcoin took a significant hit as a result of this news and is currently trading at approximately $20,900. This represents a 5.05% decline in the last 24 hours, compared to an 11% drop recorded in during the last seven days. The fact that market participants are selling off their holdings in preparation for the implementation of the new budget can be felt across the broader crypto market. As, not only Bitcoin, but the majority of leading altcoins such as Ethereum, XRP and Polygon are recording significant losses at the time of writing.
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