Wall Street analyst Thomas Lee believes that tax season will cause a massive crypto selloff, as reported by CNBC. Why? Because U.S. households likely owe as much as $25 billion in taxes on cryptocurrencies.
Lee, the head of research at Fundstrat Global Advisors, predicts that this large amount will lead to people getting rid of their crypto before the mid-April tax filing deadline. This is to avoid having to pay taxes on any capital gains earned through cryptocurrencies.
Lee stated that “this is a massive outflow from crypto to USD and historical estimates are each $1 of USD outflow is $20-$25 impact on crypto market value.”
“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.”
With the market already wobbly, can it handle any more selloff right now?
Think you won’t get taxed? You’d be wrong. The IRS considers cryptocurrency as property, which means that all crypto transactions will be taxed. But would selling your crypto even help matters? Not really, because you’d still get taxed for the earnings you’d make off of selling your cryptos. So, you might as well HODL, because either way, the taxes are coming.
Selling crypto due to fear of being taxed on it isn’t going to help anyone, least of all crypto owners. However, Lee may very well be right in that the oncoming tax season may cause a massive crypto selloff, due to this perpetuated – yet false – fear. So, let’s get things straight: if you own crypto, you will be taxed for it, no matter if you’re profiting from selling, trading, or holding. Let’s not cause a crypto drop.
What do you think?
Featured image: stevepb