Bitcoin losing favor with large and institutional investors? - Kakiforex.com - Financial Market Media No. 1 in the World Bitcoin losing favor with large and institutional investors? Bitcoin losing favor with large and institutional investors?

April 24, 2021

Bitcoin losing favor with large and institutional investors?

 The fundamental background for Bitcoin is getting worse for several reasons. Some analysts link the Bitcoin slump to the fact that the hashrate of Bitcoin mining pools plummeted by almost 50% due to power outages in the Xinjiang region, China, where up to 30% of the country's mining capacities is clustered. Some crypto exchange platforms have come under scrutiny of the US Securities and Exchange Commission and are facing huge penalties for alleged money laundering through Bitcoin. Turkey imposed a ban on payments for goods and services by digital currencies. Eventually, crypto investors were discouraged by the fresh news that was bearish for the whole crypto market, not only Bitcoin. US President Joe Biden is going to raise taxes for wealthy Americans. This tax is called a tax on capital growth or, in other words, on investments. This tax is already in force in the US with the rate of just 20%. If the tax reform is signed into law, it will increase to 39.6%. Currently, investors are subject to the tax on investment returns. All in all, American millionaires and billionaires will have to allocate 43.6% of a profit from any investment to the government.


One more thing. Tax rates differ in various states in the US. For example, the tax rate on investment in New York could be 52.22% but in California it is as high as 56.7%. Logically, from now on, investors will revise their portfolios in favor of safer assets. In this context, market participants rushed to sell off Bitcoin as an extremely lucrative financial instrument for the obvious reason. Investors are unwilling to pay half of the gains from investments in "the digital gold". Like other cryptocurrencies, Bitcoin is a highly risky investment tool, though it can yield fat profits. Nevertheless, new tax rates will take shine off cryptocurrencies as profits could not be so fat, taking into account higher risks.


A lot of crypto analysts reckon that a tax hike on capital gains in the US could deal a devastating blow to Bitcoin. In fact, the new legislation will hardly kill the most popular cryptocurrency but it will trigger a long-lasting bearish trend. The most dreadful developments for Bitcoin are an escape of large institutional investors. They were supposed to ensure the long-term bullish trend for Bitcoin. Retail individual investors are expected to get rid of digital tokens as soon as they feel that the time is ripe for a sell-off. They cannot afford to keep digital holdings for years to sit out a nosedive. Retail investors strive to gain utmost profits. So, they will decide to sell Bitcoin promptly. Unlike them, large crypto investors were able to hold Bitcoin in their portfolios for long. The question is whether they will want it. To round up, the fundamental background for Bitcoin has turned sharply negative over the last weeks. Such dismal news will drag down other cryptocurrencies for sure.