The CEO of crypto intelligence firm Messari says that the Biden administration’s proposed tax hike on capital gains could be bullish for crypto and the decentralized finance (DeFi) space.
In a new interview on CNBC, Ryan Selkis says that investors may turn to DeFi amid plans to increase the federal capital gains tax rate to as much as 43.4% from its current rate of 23.8%.
“If you think about this capital gains issue, one of the unintended consequences might be that more capital’s locked in this crypto ecosystem long term and medium term. Ultimately, that’s going to be to the benefit of this entire new class of assets.
They’re referred to as DeFi assets, essentially, being able to borrow against existing crypto holdings rather than sell them and trigger a taxable event. You might have structurally higher interest rates. You might have a better tax setup to invest in those assets and those protocols in that ecosystem versus taking money out of the equation. So I still think that there’s a lot of upside in this market.”
As for the current Bitcoin correction, Selkis says the dip can bring in a new wave of buyers.
“If you look at the performance, just year-to-date, the total crypto market cap is still up 100%. Bitcoin is still up 65%, so even though we come back at about 25%, that’s just the normal course of volatility. If you look at any other time period outside of the one week, 24-hour, and one month, Bitcoin and crypto at large are still the highest performing asset classes and the highest performing mega assets, so this could be a good buying opportunity.”
Selkis also explains why he thinks that the crypto market has not yet reached the top.
“Believe it or not, even though we’ve had a major run-up this year, we haven’t seen something analogous to the last couple of cycles where the local top and that cyclical top is really marked by a doubling of Bitcoin and Ethereum price in less than a week, which is an insane pace of growth. We haven’t seen anything close to that, so I think if you’re looking for a blow-off top, this probably isn’t it. It’s probably just that usual course of volatility, and we’d actually expect in a typical bull cycle to have six pullbacks of about 30% or more. We’ve had three so far versus six in 2017, for instance.”
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