Bitcoin price crash: Why is BTC stock going down?
THE price of Bitcoin has plunged by $15,000 this morning, falling to its lowest value since March.
The cryptocurrency dropped from an all-time high of $63,745 (£45,918) on April 14 to $48,409 (£34,871) at around 12pm today, according to Coinmarketcap.com.
The value plunged by more than 10% over the past 24-hours, and it's the first time in six weeks that it fell below the $50,000 (£36,017) mark.
The crash follows a year of highs, but Bitcoin is still worth significantly more than it was in March 2020 when it was valued below $5,000 (£3,601).
Even so, it's a stark reminder of the high risks that come with investing in cryptocurrency.
You should never invest unless you understand it and can afford to lose cash.
It comes days after Bitcoin had its biggest one-day drop in two months on Sunday, after reaching record highs for the first time earlier this month.
Capital gains tax hike fears
The fall comes over fears President Joe Biden could slap a capital gains tax worth up to 43.4% on investments held for longer than a year.
It would reverse former President Trump's 2017 tax cut for the wealthy and could hit the pockets of those who make serious gains on cryptocurrency.
5 risks of crypto investments
THE Financial Conduct Authority (FCA) has warned people about the risks of investing in cryptocurrencies.
- Consumer protection: Some investments advertising high returns based on cryptoassets may not be subject to regulation beyond anti-money laundering requirements.
- Price volatility: Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.
- Product complexity: The complexity of some products and services relating to cryptoassets can make it hard for consumers to understand the risks. There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.
- Charges and fees: Consumers should consider the impact of fees and charges on their investment which may be more than those for regulated investment products.
- Marketing materials: Firms may overstate the returns of products or understate the risks involved.
The speculative crackdown on crypto money gains was enough to spook some investors who have been quick to sell up.
Other cryptocurrencies have also taken a hit over the past 24 hours.
Yesterday, Ethereum, also known as Ether, shot to record highs but has since plunged by 8.6%.
Binance Coin has also dropped by 9.13%, while XRP has fallen by a huge 15.45%.
"It is important to note that Biden's proposal to increase capital gains tax will need to go through the Senate, and, even if approved, we still don't know a date that it would go live," said SimonPeters, cryptoasset analyst investment platform eToro.
"Nonetheless, we are clearly seeing some selling pressure.
"This has coincided with the crypto market arguably looking quite frothy after a ramp up in purchases (and prices) in recent months, with this announcement acting as a catalyst for a deeper retracement."
Bitcoin has already plummeted by 25% from its all-time high and is on track for a 15% loss on the week, but experts reckon the declines are only be temporary.
"Whilst these sorts of price fluctuations would be real cause for concern in the stock market, we are used to seeing price swings like this in cryptoassets," Mr Peters added.
Novice cryptocurrency investors should be wary and do thorough research before parting with their cash.
There have also been warnings around scams related to cryptocurrencies,
Bitcoin's surge last week was helped by Coinbase going public – it's the first cryptocurrency exchange to trade its shares on a stock exchange.
The cryptocurrency hit previous highs in February, when Tesla announced it would soon allows customers to make purchases using Bitcoin.
That announcement came with the revelation that Elon Musk's tech firm had also invested $1.5 billion in Bitcoin.
Bitcoin broke through the $20,000 price mark for the first time in December as interest in bitcoin becomes more mainstream.
But the price previously plummeted when the coronavirus crisis first hit, sinking to £3,300 last March.
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