Biden Reforms Spur Growth in DeFi Sector and Cryptocurrencies
Messari, the CEO of the analyst firm, believes the Biden administration proposed capital gains tax hike could spur growth in the DeFi (decentralized finance) and cryptocurrency sectors.
Ryan Selkis believes that with plans to increase the federal capital gains tax rate to 43.4% from its current level of 23.8%, investors may turn their attention to DeFi.
One of the unintended consequences could be that more capital will be locked in this cryptocurrency ecosystem in the long to medium term when it comes to capital gains. This will ultimately benefit the entire new asset class.
DeFi assets make it possible to borrow against existing savings in cryptocurrency, rather than selling them and launching a taxable event. You can get higher interest rates, a better tax situation, without any need to withdraw money from the system. There appears to be plenty of room for growth in this market.
Regarding the current correction in Bitcoin, Selkis believes that the fall could attract a new wave of buyers. If you look at the profitability, over the current year, the total capitalization of the cryptocurrency market has grown by 100%. Bitcoin has 65%, so even if it returns to 25%, this will be a normal movement of volatility. When you look at weekly, daily, or monthly profitability, bitcoin and other crypto assets are still regarded as the most profitable, for this reason there might be a good buying opportunity now.
According to an expert, the cryptocurrency market has not yet reached its peak because a significant increase in the rate could be observed and nothing similar could be seen during the last couple of cycles in 2021. If you want to see a downed peak, you need to look for such opportunities elsewhere. This is probably just a normal volatility move and we expect a typical bull cycle to have six pullbacks of about 30% or more. For example, there were only three so far, down from six in 2017.
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