Within a space of two hours, Bitcoin declined by more than 6% on Monday, less than $7,000 as the April tax-filing submission draws nearer.
As of Monday, the cryptocurrency went down to $6,646.07 based on data from CoinDesk. Over the past month, bitcoin prices have dropped over 27%.
This month declines are mainly as a result of tax-related selling says some analysts.
In a report last week, Thomas Lee, head of research at Fundstrat Global Advisors explained, that U.S.S household has debts of close to $25 billion in capital gains taxes for their cryptocurrency holdings. To reach up to tax liabilities, holders are selling bitcoin, which implies “massive” exchange into U.S. dollars prior to the April 17 tax filing submission.
For this year, bitcoin prices have dropped by 52%, prior to its decent start of the year with $14,000. According to data from the Coinmarketcap, the overall cryptocurrency market has lost about half of its value since the start of the year.
Another factor that has been piling pressure on the market prices is the uncertainty surrounding regulations.
Following the announcement of the SEC stating that online platform exchanging cryptocurrencies that are reflected as securities require registering with the agency, bitcoin prices dropped to less than $10,000 in March.
Additionally, the SEC went hard on a fundraising technique referred to as initial coin offerings. Recently, the SEC accused two developers of a cryptocurrency firm supported by Floyd Mayweather with conducting criminal ICO.
The international regulator is divided on how to handle the cryptocurrency which lacks the control of a central bank.
Last week, the Reserve Bank of India revealed that regulated financial institutions in India are no longer allowed to legally transact with cryptocurrency.
The market is in price instability until there is a certainty on regulations, Ari Paul, CIO and managing partner of cryptocurrency investment firm BlockTower Capital explained.
“We’re in a bear market until new buyers are enticed,” Paul stated, going on to state that institutions are hindering the flow of money into the market until investment channels such as ETFs are permitted.