Bitcoin Slumps To $20K, Ethereum, Dogecoin Shiver On Biden's New Crypto Tax Scheme: Analyst Sees 'Euphoric' Bears At This Level

Major coins traded in the red on Thursday evening after President Joe Biden's new budget proposal that could potentially levy a 30% tax on electricity costs for cryptocurrency miners.

What Happened: Bitcoin BTC/USD quickly regained some of its lost ground late and was hovering at about $20,040, down 7.94% over the past 24 hours.

After hitting a record high of over $69,000 in November 2021, Bitcoin tumbled shortly thereafter and continued to decline throughout 2022, reaching around $16,600 at the start of 2023. However, early February saw a powerful rally, taking Bitcoin to over 50% gains in one year to a price point of $25,000.

Ethereum ETH/USD fared similarly to Bitcoin and was also down about 7.42% to change hands below $1,450. Dogecoin DOGE/USD was trading at $0.065, down 9% in the last 24 hours.

At the time of writing, the global crypto market capitalization stood at $929 billion, a decrease of 6.68% over the last day.

U.S. equities fell sharply on Thursday as financial stocks took a hit and investors braced for a potentially market-shaping payroll report due out on Friday. The S&P 500 and Nasdaq Composite both ended the day down 1.85% and 2.05%, respectively.

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News Highlights: According to a Treasury Department supplementary budget explainer paper released on Thursday, any firm using resources to mine digital assets would be subject to an excise tax amounting to 30% of the costs of electricity used. This proposed tax would be implemented after the end of the year, and the rate would be phased in steadily over three years — 10% a year — until it reaches the maximum rate of 30% by the third year. Additionally, crypto miners would be required to report the amount and type of electricity used, as well as the value of that electricity.

Federal Reserve's top regulatory official, Michael Barr, on Thursday, emphasized the "potential transformative" effects of cryptocurrency technology on the financial system–but highlighted the need for "guardrails" to ensure these effects are realized. He cautioned that recent market turmoil surrounding crypto has illustrated the risks it could pose to traditional banks while noting that regulatory measures have been put in place to encourage caution.

Analyst Notes: “The fight for survival did not last long for Silvergate Capital.  After the close, Silvergate Capital announced its intent to wind down operations and voluntarily liquidate the Bank in an orderly manner and in accordance with applicable regulatory processes. Bitcoin is lower and getting very close to the February lows. This remains a tough environment for crypto given the fallout from Silvergate Capital, so Bitcoin could see further selling pressure test the $20,000 level,” said Edward Moya, senior market analyst at OANDA.    

Michael van de Poppe, founder and CEO of trading firm Eight, said that Bitcoin is taking the low and there is a lot of liquidity being taken, hence the recent acceleration seen in both Bitcoin and Ethereum. He believes that Bitcoin could hit the $20,400 low and then its surge could be accompanied by bearish euphoria. He also notes that the RSI analysis has already finished resetting.

Analyst Carl From The Moon said  Bitcoin has formed a falling wedge. This pattern has a 70% chance to break up.

Santiment noted that with Bitcoin breaching $20,600 and altcoins falling even faster, the crypto community is dialing its focus back to BTC. This marks the highest ratio of BTC vs altcoin discussions since July 2022, a sign that Fear is prevailing in the markets. 

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