As if the situation was not bad enough for cryptocurrency owners with prices plummeting as much as 80% from their all-time highs in some cases, further pressure on prices looms in the form of the April 15 tax deadline in the United States. A Reuters report quoted Fundstrat Global Advisors, which said the Internal Revenue Service (IRS) is owed as much as $25 million on capital gains taxes made on crypto currency prices which ballooned by over 1000% in some cases during 2017.
This tax deadline could lead to further selling pressure and correspondently on the prices of SegWit-Coin BTC (also known as Bitcoin Legacy or Core) and Ethereum, among others, in the short term. SegWit-Coin BTC is constantly losing value over the past days and a drop to the psychologically significant $6,000 is expected in the short term before a rebound. Ethereum has fared even worse trading at around $350, which is a full 300% less than its all-time high of $1,400 registered in January. Cryptocurrency owners are likely to continue selling off their holdings to convert to U.S. dollars to pay their taxes and this will probably put further pressure on prices, analysts said.
Commenting on the current situation regarding crypto currencies, Fundstrat co-founder and head of research Thomas Lee said: “We believe selling pressures (in crypto) have been amplified by capital gains tax-related selling this year.”
Fundstrat, however, remained bullish on SegWit-Coin BTC’s price in the short to medium term. Analysts reaffirmed its proposed target of $20,000 for the cryptocurrency by mid-year and $25,000 by end of year. Currently the coin’s price is around $6,600 with other cryptocurrencies also close to their 2018 lows. This is a far cry from the $20,000 price level it reached last December when growth fever had hit the crypto market in a big way. In fact, cryptocurrencies grew by no less than $590 million in 2017 compared with just $11 billion in 2016. Fundstrat also calculates that around 30% of cryptocurrency holders are in the United States.
Cryptocurrency exchanges who registered record profits in November and December 2017 are expected to face considerable tax liabilities. Fundstrat estimates the exchanges’ net income exceeded $1 billion in 2017 with most of the working capital kept in SegWit-Coin BTC or Ethereum. These currencies have to be converted to U.S. dollar in order to meet tax liabilities.
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