Massive Selling Of Cryptocurrencies Before Tax Day Predicted

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A Wall Street analyst has reportedly predicted a massive selling of cryptocurrencies to U.S. dollars in the lead up to the mid-April tax filing deadline in the United States.

Thomas Lee, head of research at Fundstrat Global Advisors, estimates that U.S. households likely owe $25 billion in capital gains taxes for their cryptocurrency holdings.

This is in addition to crypto exchanges, which are liable to pay income taxes.

"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 bln and keep working capital in [Bitcoin]/[Ethereum], not USD — hence, to meet these tax liabilities, are selling BTC/ETH," CNBC quoted Lee as saying.

Each $1 of US Dollar outflow is $20-$25 impact on crypto market value, according to him.

The crypto markets reported near 50 percent losses across Q1 2018. It was the worst first quarter performances for Bitcoin and Ethereum. However, anyone who capitalized on the crypto market boom in December 2017, when Bitcoin hit the record price of close to $20,000, will need to pay capital gains tax on their earnings.

As per Lee's estimate, investors likely realized a record $1.04 trillion in capital gains for stocks and cryptocurrencies last year, which witnessed dramatic rise in value.

Lee's Bitcoin Misery Index (BMI), created last month to show how "miserable" BTC holders are based on the current price, shows that crypto holders are currently feeling the "misery."

He said that tax-related selling would add to bitcoin's tough start to the year, but he expects the most popular crypto currency to find footing after April 17, the deadline to file income tax returns.

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