On Friday, the cryptocurrency Ether fell sharply from a record high, while Bitcoin fell as well. This happened amid speculation that US President Joe Biden’s is deciding to increase capital gains taxes.

This would discourage investment in digital assets.

The declines followed Biden’s announcement on Thursday of a slew of potential reforms to the US tax code.

This will include a measure to nearly increase capital gains taxes to 39.6% for those making more than $1 million.

Although social media was flooded with posts about the proposal harming cryptocurrencies and individual investors complained about losses.

But, traders and analysts said the drops are likely temporary, given the growing acceptance of digital currencies as a legitimate asset.

“That’s what everybody is worried about right now,” said Chris Weston, head of analysis at Pepperstone Markets Ltd, a Melbourne-based foreign exchange broker.

“And I believe you’re doing some technical selling as well. Ether has served as the movement’s poster boy. It has outperformed Bitcoin by a huge margin.”

Ether has dropped more than 10% to as low as $2,140. This occurred just one day after setting a new high of $2,645.97. It was last trading at $2,242.90, down 6.55 per cent.

Bitcoin fell 3.44 per cent to $49,903.71, a loss of 3.44 per cent.

According to Kelvin Wong of CMC Markets in Singapore, if Ether can stay above $1,955 going into the weekend, its upward trend should continue.

The next level of support for Bitcoin is $40,665, but Wong also believes that investors will arise before that level is reached because the downturn appears to be overdone.

This year, Bitcoin has increased by 74%, while Ether has more than tripled.

Both have outperformed conventional asset groups, aided by the entry of mainstream companies and major investors, such as Tesla Inc and BNY Mellon, into the cryptocurrency world.

Biden’s capital gains tax hike proposal wreaked havoc on cryptocurrency trading in New York, spilling over into the Asian session, but traders expect calm to return soon.