On December 27, 2023, the Biden administration finalized a new tax rule for crypto brokers. This rule has caused a stir in the crypto world. It is affecting major cryptocurrencies like XRP and Bitcoin (BTC).
In a move that has sent shockwaves through the cryptocurrency market, the Biden administration finalized its crypto broker tax reporting rule on Friday, December 27. The new rule will start in 2027. It requires crypto exchanges and platforms to track and report user activities. This includes the sale of all digital assets, like NFTs and stablecoins. The rule applies to both US and non-US users. This will increase government control over the crypto industry.
Impact of New Tax Rule on XRP and BTC
The new tax rule has a big impact, especially on well-known assets like XRP and BTC. Bill Hughes, a lawyer at ConsenSys, said trading platforms must track all digital asset transactions. This includes every type of transaction. The rule has caused uncertainty and increased volatility in the crypto markets.
Hughes said the rule will likely face legal challenges, including lawsuits and Congressional review. Even so, the final approval shows the government’s strong position on digital assets. This could make the market’s regulatory issues worse.
SEC Appeal Could Impact XRP’s Future
XRP is still facing challenges. The SEC vs. Ripple lawsuit is a big focus. The SEC wants to extend its appeal until mid-January 2024. This uncertainty has led to fluctuations in XRP’s value, with many investors anxiously awaiting the court’s ruling.
In July 2023, Judge Analisa Torres ruled that XRP sales did not meet the Howey Test, which was a win for Ripple. However, if the SEC overturns this decision on appeal, XRP could face big problems. It might be delisted from exchanges, causing a sharp drop in demand.
Despite these challenges, XRP has stayed above $2 in value. However, the recent 6.21% drop on December 26 has raised concerns about its future. XRP’s ability to reach its previous high of $3.55 will depend largely on the outcome of its ongoing legal battles.
Regulatory Pressure Fuels XRP’s Price Decline
As of December 27, XRP dropped by 0.42%, closing at $2.14. The overall crypto market also fell, with the total market cap down by 0.96%. The Biden administration’s tax rule and the uncertainty around the SEC appeal have caused a lot of volatility. This has left many XRP holders worried.
The short-term price of XRP will depend mostly on the SEC’s appeal. If the SEC continues with its appeal, XRP could drop significantly, possibly going below $1.50. However, if the SEC withdraws its appeal, XRP’s price could rise and might even reach its all-time high again.
BTC Falls Below $95k Amid Regulatory Pressures
Bitcoin (BTC) has also felt the impact of the Biden administration’s new tax rule. On December 27, BTC fell below the critical $95k level, reflecting broader concerns about inflation, the Federal Reserve’s rate path, and regulatory pressures from the DeFi broker tax rule.
The ongoing uncertainty surrounding the SEC’s stance on crypto and the growing regulatory framework have weighed heavily on BTC’s price. The digital currency also faced additional pressure from developments in the BTC-spot ETF market, where net outflows could continue to challenge BTC’s price momentum.
Fidelity and ARK ETFs See Growth, But Volatility Looms
The US BTC-spot ETF market has had mixed results recently. Funds like the Fidelity Wise Origin Bitcoin Fund and ARK 21Shares Bitcoin ETF saw big inflows. However these funds might soon experience outflows, which could increase BTC’s volatility. On December 27, BTC’s price closed at $94,242, down 1.52% from the previous day.
Despite short-term ups and downs, growing corporate interest in BTC is positive for its long-term future. Companies like MicroStrategy, Tesla, and Marathon Digital have built large BTC reserves. Recently, Bitwise filed for a Bitcoin Standard Corporations ETF, showing more interest from institutional investors.
BTC Price Outlook: Can Bitcoin Break $100k?
Looking ahead Bitcoin’s future will mostly depend on changes in the BTC-spot ETF market and the evolving regulations. If the market experiences continued inflows and growing institutional adoption, BTC could break through the $100k barrier. However, any significant outflows or regulatory setbacks could weigh on BTC’s price, potentially sending it toward the $90k support level.
The Biden administration’s new crypto tax reporting rule, finalized on December 27, 2023, has caused significant volatility in the cryptocurrency market, particularly affecting XRP and Bitcoin (BTC). The new rule requires platforms to track and report all digital asset transactions, increasing regulatory pressure. This has already led to price changes. XRP’s future is unclear due to its ongoing legal battles with the SEC. Bitcoin’s price faces challenges from regulations and market fluctuations. The future of both assets depends on legal decisions and changing regulations.
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