(CNN) — Bitcoin and other cryptocurrencies were deep in the red early Friday, selling off over worries that the US government will hike taxes in the near future.
Bitcoin dropped below $50,000 per coin for the first time since early March. Bitcoin was down more than 9% at $49,759 early Friday, according to trading platform CoinDesk.
The second-largest cryptocurrency, Ether, was down more than 12% at $2,263 per token.
The steep drop followed the same pattern as US stocks in the prior session. On Thursday, financial markets were hit by worries over tax hikes, following news reports that reiterated the Biden administration’s intentions to raise capital gains taxes.
The White House has proposed raising capital gains taxes to 39.6% for people earning more than $1 million per year from only 20% at the moment. Coupled with an additional levy that high-income earners pay to fund the Affordable Care Act, the top rate would be even higher. Biden’s plans had long been public knowledge, but fears about the reality of higher taxes nevertheless gripped the market this week.
Crypto investors fear that higher capital gains taxes would limit demand for cryptocurrencies like bitcoin, which have risen dramatically in recent months. But tax worries aren’t the only factor weighing on bitcoin & Co.
Digital currencies might have overheated around the public listing of Coinbase, which entered the market with a near $100 billion valuation last week. Coinbase shares were down nearly 3% in pre-market trading as the post-listing rally has fizzled out.
On top of that, “regulatory concerns, fears over valuation and bullish exuberance at overbought levels all added to the selling pressure,” said Fawad Razaqzada, market analyst at ThinkMarkets.
At the same time, one investor’s selloff is another’s opportunity and the sharp drop in popular cyrptos could be a chance to snap them up at a better price, said Razaqzada.