Uncle Sam Wants Your Crypto Gains
Dear Rundown Reader,
The other day we joked, “who cares about bitcoin.”
Truth is we do, it’s just the market action was too hectic to ignore last week.
But cryptos are seeing extreme volatility and losses too.
And while trade war talks are cited as the reason the equities markets are spiralling, there’s been no clear answer to explain crypto’s woes.
That is until now. Today we examine a new theory and see if it holds water.
Cryptos are sinking because… tax season! Of course! Why didn’t we think of that…
Your Rundown for Friday, April 6, 2018…
Bitcoin’s Dive Starting To Make Sense
Bitcoin’s price fell below $7,000 yesterday for the first time in nearly two months, capping off one of the worst slides in the cryptocurrency’s history.
Experts, owners, and techies alike have tried to pin down why the king of crypto has cost so many so much recently.
As Fortune puts it. A $1,000 investment at last year’s peak of roughly $19,000 would now leave you with a scant $370.
The initial sell-off was easy to explain.
People took significant gains and walked with the profits. After all that’s why you invest.
But the selling kept happening.
At first it was attributed to government crackdowns in the U.S. and Asia. As well as other regulatory impacts like increased SEC involvement and U.S. banks refusing to be associated with exchanges.
But the crypto experts said we’ve seen this before. Cryptos will bounce back soon, they said.
Yet holders kept selling at an insane rate, tanking the price down to where it sits today, as we write, at $6,717.81.
Here’s the year-to-date action:
So much for the “bounce back soon” theory.
Now we may actually have an answer for why cryptos continue to decline.
The taxman is coming and people are selling off to cover their capital gains obligations.
Yes, we know, cryptos technically exist outside the taxman’s reach. Brave new world and all the rest.
But according to Tom Lee, head of research at Fundstrat Global Advisors, U.S. taxpayers will owe approximately $25 billion in capital gains taxes on cryptos this year, as reported by Bloomberg.
The Bloomberg report also notes Lee calculated this based upon the fact “that U.S. households had $92 billion in taxable gains from cryptocurrencies in 2017…”
Last year, bitcoin soared more than 13x in price and hit an all-time high of $19,343 in mid-December.
People were raking in incredible gains.
But now as CNBC reports, the “IRS treats ‘virtual currency’ as property, meaning transactions are taxed.”
Meaning now people must pony up and pay Uncle Sam.
Given this new theory, it starts to make sense why holders are selling en masse.
Instead of dipping into their own bank accounts, coin owners are trimming their positions.
Then taking that cash and paying their tax obligations.
It seems so rational. It makes so much sense. It can’t possibly be true.
And according to Tom Lee, the sell off right now is also a signal that we are about to hit a big run in bitcoin once tax season is over.
You buying this? Does this sound plausible?
We have a bridge we want to talk about too…
Now, turning to the markets this morning…
Market Rundown for Fri. April 6,
S&P 500 futures are down 27.00 at 2,634.75.
Oil’s drops 1% to $62.91.
Gold’s down 2.40 at $1,326.
Bitcoin continues to fall. Now at $6,579, according to CoinDesk this morning.
We’ll talk again on Monday.
For the Rundown,