Might want to sell your Bitcoins now! US tax day April 17 could crash crypto
Some Americans hate tax day, while others know that filing returns could recover great sums of money.
For the rest of the world, US tax day usually meant nothing, until Bitcoin and other crypto currencies arrived.
Taxed on capital gains, Americans will be unloading their digital wallets of mostly Bitcoins to pay for these taxes.
According to CNBC, Bitcoin rose more than 1,300% last year, and as a result, US households will owe roughly $25 billion in taxes for digital currency holdings, according to Tom Lee, head of research at Fundstrat Global Advisors.
A massive sell out is inescapable, and prices, which have recently recovered to $8400, will likely drop, also impressively.
Shame, as Bitcoin was showing signs of recovery
Great last week
After breaking the $8,000 barrier last Friday, Bitcoin energized users and enthusiasts by hitting $8,400 over the weekend, after dwelling in the $6000-$7000 range for quite a long stint.
Today, Bitcoin is trading at 7,900 after truly a remarkable week.
According Coinbase charts, Bitcoin was up 19%, Ethereum was up 32% and Litecoin was up 12%, as reported by Forbes.
Ripple was up 38% according to Bloomberg data.
“Price moves were strong and consistent and took Bitcoin back above the 200-day moving average,” said Forbes.
The question here is will crypto markets be bearish following the tax season.
“We may look back on this time as the ‘Crypto Tax Crisis of 2018,’ as thanks to tax liabilities we’re witnessing the most concentrated period of net fiat outflows that the crypto asset ecosystem has experienced in its short life,” Chris Burniske, a partner at Placeholder VC, and Jonathan Cheesman wrote in a recent, highly detailed Medium post, as reported by Coindesk.
Tax payers have expressed theri surprise on social media channels that the tax man is asking for quite large sums of money.
“I didn’t know this back then but it looks like I owe income taxes on those trades, which adds up to about $50,000,” a Reddit user wrote a month ago.
A point of note is that Japan’s tax deadline which was on March 15th and will compound the matter further once selling of Bitcoins begins.
“Imagine an individual who purchased 1.5 bitcoins in January of 2017 for $1,200 a bitcoin,” Woodin told CoinDesk. “If that individual sold one bitcoin in December of 2017 they could have realized a gain of ~$18,000. This short term gain is taxed as ordinary income in the U.S. Assuming a tax rate of ~30 percent, the tax liability would be about $5,400.”
The only saving grace to avoid a selloff is that Bitcoin owners can work with the Internal Revenue Service (IRS), to set up a payment plan and then hope for a recovery in crypto markets.
Is there a rebound post Tax day?
CNBC said that Bitcoin prices edged lower Monday (and even lower today) ahead of the much-anticipated tax deadline, “which bullish pundits say has been holding back the digital currency this year.”
Bulls are referring to Bitcoin dropping more than 40% since Jan. 1, after starting this year above $14,000.
“Tax-selling has been a significant factor in downward crypto prices over the past few weeks. I would expect this downward pressure to abate after tax day,” said Spencer Bogart, partner at Blockchain Capital, as reported by CNBC.
Tom Lee has predicted that Bitcoin will hit $20,000 by the middle of the year and $25,000 by the end of 2018.
Pantera Capital Founder and CEO Dan Morehead said in an investor letter published last week that Bitcoin is “highly likely to have exceeded $20,000 within a year.”
Venture capitalist Tim Draper predicted last week that bitcoin will reach $250,000 by 2022.
Current crypto prices (Markets Insider)