LONDON / GUANGZHOU, China – Bitcoin and other digital currencies fell on Friday as a capital gains tax hike proposed by US President Joe Biden sparked a sell-off.

Bitcoin fell 7.3% to $ 49,730, according to Coin Metrics data. It’s the first time since early March that Bitcoin has traded below $ 50,000. Ether fell to $ 2,320, an 8% decrease. XRP, the fifth largest cryptocurrency, fell 16%.

Bitcoin rebounded to over $ 51,000 late Friday.

According to CoinMarketCap, this has wiped out the entire cryptocurrency market worth more than $ 200 billion.

“The market has grown quite a bit overall and will likely cool off before the next section,” Vijay Ayyar, director of business development at Cryptocurrency Exchange Luno, told CNBC via email.

President Biden is expected to increase the long-term capital gains tax for the richest Americans to 43.4%, including a surcharge. That would be higher than the highest federal tax rate on wages. The new tax rate would apply to returns on assets held in taxable accounts and sold after more than a year.

That sparked an overnight selloff in the equity markets, with all three major US indices ending Thursday’s session in the red. Analysts said fears over Biden’s investment income taxation proposal could spread to crypto investors who had a great year with Bitcoin prices more than six-fold in the past 12 months.

Still, one crypto entrepreneur said Biden could do his industry a favor.

“It would make even more sense to play that oldest prank in the ‘Manage Your Finances’ smart book: borrowing against your assets to avoid capital gains taxes,” said Antoni Trenchev, co-founder of crypto lender Nexo.

“And what better security than one that – despite today’s price collapse, likely caused by this proposal – is gaining in value like Bitcoin?”

“Things are becoming more and more established,” Eric Demuth, CEO and co-founder of digital asset broker Bitpanda, told CNBC’s “Squawk Box Europe” on Friday. “The more money that comes into the market, the lower the volatility.”

“And for the private investors who get in there, the strategy is always to never put everything in one basket and only to put a very small part of your portfolio in cryptocurrency, in Bitcoin. It doesn’t matter if you are a strong believer or not, diversifying your wealth is key. “

However, concerns about government action against Bitcoin continue to cloud the market. Jesse Powell, CEO of a large cryptocurrency exchange called Kraken, warned governments against restricting the use of Bitcoin and other cryptocurrencies.

India is planning to introduce a law banning the trading or even ownership of cryptocurrencies, Reuters reported last month. In February, US Treasury Secretary Janet Yellen labeled Bitcoin a “highly speculative asset” and said she was concerned about potential losses to investors.

Authorities around the world are examining how Bitcoin can be regulated. The deputy governor of the People’s Bank of China last week called Bitcoin an “investment alternative” that marked a more progressive tone in cryptocurrencies after violent crackdown by the country’s regulators against the industry in 2017 and 2018.