As of now, the taxation season is in full sprout in the US. This is a normal event obviously however not at all like the earlier years, this will be the first run through the crypto investor will likewise be paying immense taxes.
As indicated by the Wall Street analyst, Thomas Lee, who was likewise the previous chief strategist at JP Morgan Chase, the US people with digital currency holdings owe about $25 billion in capital gains taxes.
This would be the first time that such a gigantic amount of the digital currencies would be sold into the US dollars in order to pay the income tax by the mid-April due date of tax filing.
A year ago, digital currencies picked up a lot of profit and the US Internal Revenue Service (IRS) are prepared to take advantage of them. With digital currencies being treated as property for the taxation purpose, each profit produced using the trading of bitcoin or some other digital currency or through some other method is presently taxable for each US native.
Allegedly, this digital currency tax on capital gains of $25 billion would be more than 20 percent in contrast with other investment alternatives like equities, stock, and precious metals, to such an extent that the present bear situation of the crypto market could have been primed by taxation.
The tax related selling will additionally add to the market’s rough start. In the first quarter, the plunge of around 50 percent was because of regulatory uncertainty as said by Lee:
“Regulatory headline risk is still substantial. And sentiment remains awful, as measured by our bitcoin misery index, which is still reading misery.”
The taxation obligations of individual investors would prompt the need to sell. In light of the historical details, the capital gain acknowledged by the US household is some place around $1.04 trillion that implies the tax liability of about $25 billion for a year ago.
As per Thomas Lee:
“Additionally, we believe there is selling pressure by crypto exchanges who are subject to income tax in U.S. jurisdictions. Many exchanges have net income in 2017 [of more than] $1 billion and keep working capital in [bitcoin]/[ethereum], not USD — hence, to meet these tax liabilities, are selling BTC/ETH.”
He additionally expresses that:
“This is a massive outflow from crypto to USD and historical estimates are each $1 of USD outflow is $20-$25 impacts on crypto market value.”
Having said that, Lee clarifies that the selling around the tax season is likely to die down in about two weeks and it is expected of “bitcoin to find footing after April , tax day.”