Tax-Related Concerns on Bitcoin Transactions
Tax-Related Concerns on Bitcoin Transactions
There recently have been concerns about how past bitcoin transactions will be treated by U.S. tax authorities. These tax-related concerns, along with the crackdown on cryptocurrency trading across the globe, have tanked Bitcoin's value by two-thirds from the all time high of above $19,000 seen in December last year. (For more, see Will the IRS Come After Your Bitcoin Soon?)
Some market participants believe that Thursday's sudden upward price move “could be an unwinding of that (tax-related) pressure,” and the spike had a compounding effect as it “forced traders who had bet against the cryptocurrency to buy back into the market,” reports CNBC.
"The ratio of short margin trades versus longs has been increasing recently," said Nick Kirk, quantitative developer and data scientist at Cypher Capital, a cryptocurrency trading firm. "Buying volume ticked up today and a lot of these short trades got liquidated, helping fuel the rally."
IRS considers cryptocurrencies as property, making these transactions taxable. Tom Lee, the head of research at Fundstrat Global Advisors, predicts that U.S. households possibly owe around $25 billion in capital gains taxes for their cryptocurrency holdings.
As the U.S. tax deadline of April 17, which often accounts for tax-related selling, comes closer, the tax pressure is expected to lighten, which may lead to increased buying. Market participants see Thursday’s upward move as a step in that direction. While regulatory uncertainty about cryptocurrency trading across the globe is expected to continue, as the April 17 deadline passes, market participants expect a continued recovery in bitcoin valuations.
Along with the short term punters, long term investors remain firm about the continued development of the new-age bitcoin infrastructure, which remains on the fast track with increasing adaptability of the cryptocurrency across the globe.
Tax-Related Concerns on Bitcoin Transactions
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Reviewed by mir khaleq ali
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