As per CoinMarketCap, Bitcoin dipped over 8% in the past week. The new tax laws severely impacted cryptocurrency.
While the 30% tax on crypto came into effect on April 1, the 1% TDS deduction will take effect from July.
The first week of April witnessed a negative impact on BNB, Bitcoin, Shiba Inu, Ethereum, Litecoin, and Avalanche, among others.
Furthermore, Bitcoin dipped over 2% in 24 hours since it was $42,450 on Friday.
However, Binance USD, USD Coin, Dai, Binance USD, Tether, and Terra USD witnessed marginal gains.
Additionally, cryptocurrency Monero surged by over 5%.
Cryptocurrency’s downfall this week
As per CoinMarketCap, Bitcoin dipped over 8% in the past week.
Furthermore, the second-largest cryptocurrency after Bitcoin, Ethereum, crashed by over 7%.
The new tax laws negatively impacted cryptocurrencies such as – Solana dunked above 20.50%, BNB crashed near 5%, XRP dipped over 9%, and Terra dropped close to 18%.
Furthermore, Cardano dived over 11.5%, Polkadot slipped by 15%, Avalanche near dipped by 17%, Shiba Inu fell over 9%, and Polygon crashed by over 14%.
Least to say, the past week has not been kind to cryptocurrency.
The activation of new cryptocurrency laws has negatively impacted the market.
Nevertheless, not all cryptocurrencies fell prey to last week’s downfall.
Convex Finance soared by nearly 3%, Near Protocol rose almost 8%, while Dogecoin surged nearly 2%.
However, Tether remained flat.
The new cryptocurrency tax, monetary policy tightening, soaring commodities prices, stringent tax rules, geopolitical crisis, and global inflation collectively negatively impacted cryptocurrency.
What is the effect of new tax laws on cryptocurrency?
WazirX co-founder Nischal Shetty said, “the proposed 30% tax, irrespective of whether crypto-assets are capital assets or not, will be detrimental to the investor growth that the industry has been seeing so far.”
“This move will make day-traders incapable of saving on taxes even if they aren’t in the income tax brackets currently.”
“Furthermore, not allowing investors to offset losses from one crypto trading pair with gains from another type will further deter crypto participation and throttle the industry growth.”
Mr. Shetty further said, “We firmly believe that there is a need to regulate and tax crypto, but it is poised to do more harm than good in its current form.”
“It will also fail to provide desired results for the government.”
“It can result in cascading participation on Indian exchanges that adhere to the KYC norms and lead to a rise in capital outflow to foreign exchanges or those that aren’t KYC compliant.”
“This is not conducive for the government or the crypto ecosystem of India.”
JSA partner Probir Roy Chowdhury comments on the tax rules saying, “The Finance Bill seeks to impose a flat tax of 30% on cryptocurrency gains.”
“While this would result in a 5% increase in tax payable by companies in trading in cryptocurrency, this would more significantly affect smaller ‘retail investors’ who may be in lower tax brackets or have been relying on lower capital gains tax rates.”
“The Finance Bill also imposes a 1% TDS on payments to Indian residents for cryptocurrency transactions.”
“This TDS will result in a drop in liquidity, as the TDS would be imposed regardless of profit or loss.”
“The volatility of many cryptocurrencies has created a burgeoning community of high-frequency traders, who will be significantly affected by the drop in liquidity on each trade.”
While the new crypto tax laws may seem efficient, the current results are negative.
The new tax laws don’t seem to agree with cryptocurrency, impacting it negatively.
However, the past week was not kind to crypto, and there is more to know as the 1% TDS applies from July.