Bitcoin (BTC) Crashes Under $20,000 In Crypto Market Mayhem, Biden Proposed New Tax Rules

The contagion of the Silvergate Bank shutdown has spread across the cryptocurrency market. On Thursday, March 9, the broader cryptocurrency makes entered severe correction and has eroded more than $75 billion of investors’ wealth in the last 24 hours.

Amid the current bloodbath, the world’s largest cryptocurrency Bitcoin (BTC) has tanked over 9% slipping under $20,000 levels for the first time in the last seven weeks. As of press time, Bitcoin (BTC) is trading at $19,688 with a market cap of $380 billion.

As the Silvergate episode unfolded this week, Bitcoin came under extreme selling pressure. Not only Bitcoin but the Silvergate incidence has dragged the entire crypto market down ending the party since the beginning of 2023.

Along with Bitcoin, top altcoins like Ethereum (ETH) have also corrected by 10% with ETH slipping below $1400 levels today. All other altcoins in the top twenty list are down anywhere between 5-10% in the last 24 hours falling under their crucial support levels.

Apart from Silvergate Bank collapse, another reason behind the crypto market crash is the uncertain macro environment. On Thursday, the Silicon Valley Bank created a major mayhem on Wall Street collapsing over 60% in a single day.

This incident dragged all the top three indices on Wall Street down with the Nasdaq Composite collapsing over 2% to trade at 11,338 levels.

Another key development on Thursday was the Biden administration’s federal budget proposal with some changes in the tax treatment of crypto transactions. Currently, crypto investors in the United States can leverage the “Tax-loss harvesting strategy” wherein they can sell their crypto holdings at a loss and then buy back the same crypto the next day. This method allows investors to reduce their tax burned.

However, the Biden administration is planning to completely eliminate this tax harvesting structure. By eliminating these tax savings, the White House believes that the new budget will deliver an estimated $24 billion in savings.

Another major decision from the Biden administration could severely impact crypto mining companies. The US government has proposed a 30% tax on crypto miners’ electricity costs.

The Treasury Department released a supplementary budget explainer paper on Thursday, March 9. It notes: An excise tax on electricity usage by digital asset miners could reduce mining activity along with its associated environmental impacts and other harms”. Even crypto miners who acquire electricity off-grid will be subject to tax.

In a Senate Committee hearing earlier this week, Fed chairman Jerome Powell stated that they have been carefully observing the recent developments in the crypto industry.

Powell further added: There “is quite a lot of turmoil, we see fraud, we see a lack of transparency, we see run risk, we see lots of things like that. What we've been doing is making sure that the regulated financial institutions that we supervise and regulate are careful and taking great care in the ways they engage with the whole crypto space."