If you haven't noticed, the prices of cryptocurrencies have been in a pretty steady downtrend for close to 3 months now.
Which is not really that surprising when prices were up something like 20,000% across the board for many in the space.
However, the continued, and somewhat relentless selling as of late might be seen as somewhat of a surprise to some observers.
Myself, slightly included.
The current selling could be blamed on a number of things.
From increased regulation from just about everywhere, to the latest FUD news story of the day.
However, in my opinion, the two biggest drain on prices are currently coming from the SEC (Securities and Exchange Commission) and their lack of clarity on what is a security and what isn't.
Then also, the tax obligations facing many in the crypto space.
The latter possibly affecting prices more than anything else currently.
Especially when you consider that the US is either biggest or second biggest cryptocurrency market place, depending on which day you check.
People in the crypto space have enjoyed mostly tax free trading of their cryptocurrencies for the better part of 5 years now.
That all changed, however, when Coinbase was forced to turn over data on anyone that had traded over $20k worth of cryptocurrency per year in the years between 2012 and 2015.
That combined with increased commentary from the IRS saying that anytime a cryptocurrency is exchanged for another cryptocurrency is a taxable event.
The like-kind possible loop-hole has also been officially closed as the definition was recently changed to only include hard assets, like real-estate.
Which means we likely have people needing to cash out in order to properly pay taxes from years prior, some of them possibly for the very first time.
Combine that with the fact that anyone in cryptocurrency today knows that any realized gains must be reported to the IRS means that markets now are factoring in tax consequences that were likely not part of the equation before.
(Source: https://mpumalanganews.co.za/180924/always-bad/)
However, this is not all bad news.
Since markets are no longer efficient markets, yes I use that term talking about the fact that people now are forced to sell cryptocurrencies to raise cash in order to pay their taxes, there is the chance to pick up inefficiently priced coins.
In times like we have today when bitcoin and the like are likely being sold not based on any fundamental reasons but instead on the need to raise cash, it presents wonderful buying opportunities for those eager to take coins off their hands.
I have no proof that this is the single biggest driver of the selling, but it makes much more sense than what some of the talking heads out there are saying about Google, Facebook, and now Twitter banning ICO ads as the cause for the current weakness.
I've personally been picking up some coins for weeks now.
From that perspective, I am welcoming the inefficient forced selling by some as it brings better entry points.
Now, we just have to wait until we get passed April 19th!
Stay informed my friends.
Image Source:
https://www.kiplinger.com/article/taxes/T056-C000-S001-where-clinton-and-trump-stand-on-taxes.html
Follow me: @jrcornel
Haven’t thought about it until now, but that makes a lot of sense. Could mean good things for May. Thanks for the post! Resteem
It's definately becoming an under rated effect on the market. I guess it makes perfect sense though. Hopefully once it's over we can resume some sustained growth
I think selling for tax reasons has further excaberated the selling but may not be the cause of it. People might think will I owe X amount of dollars in taxes, and I own Y amount of cryptocurrency. Then the market is represented by Y-X in your theory. In my opinion though, taxation is theft! Especially from crypto to crypto. This is stifling innovation! Just my 2 satoshis.
This is an interesting take on the current trends that I hadn't considered. I'm curious about this quote:
"That combined with increased commentary from the IRS saying that anytime a cryptocurrency is exchanged for another cryptocurrency is a taxable event."
Can you explain that a bit more? So each time we turn bitcoin into steem or vice versa it's taxable? Do you have an article or something you can link that gives more information on it?
There quite a few out there if you do a quick search, but here is one: https://www.nytimes.com/2018/01/18/your-money/bitcoin-irs-taxes.html
Ah, okay. You're referring to the actual gains on the crypto investment. Do I have that right?
So if you use gains to buy other crypto currencies that can be taxable? But if there isn't a gain made before the transfer, I'm wondering how they treat that.
I never thought of it before but you bring up a good point as people are squeezed they're going to show weak hands on something as speculative and as easy to access as cryptocurrency
Liquidating other assets is not close to as easy as crypto so I think you're on to something. The market is filled with first-time investors who will be subject to trends like taxes, holiday time spending, i'm sure we'll see a big sell-off come black Friday this year as people prepare to turn their gains into spending money for deals and festive time gifts. Its the same with the Chinese new year too. Since Crypto is a global economy the market is affected by so many different buying and selling trends
I think i should put together a calender and highlight key dates i think sell offs with most likely happen and prepare properly for them. I have been picking up discointed coins during this bear run but very moderately still waiting for my big buy once i feel we've hit a bottom i can deal with
My thoughts exactly. If prices start trending up around April 19th, we'll have a pretty good idea what was causing much of the decline.
I think you've put your finger on one of the reasons for all the selling. What's even worse is that I've heard stories of people who sold cryptos for big profits in 2017 and then redeployed the capital into other cryptos that are now substantially underwater. Those people now don't have enough money to pay their taxes that are due on 2017 income because they were not attentive to the tax issues. I feel sorry for them.
Yes same here. I had that happen to me in a penny stock a few years back. Not a fun situation to be in.
Good stuff! I don't think there is enough content written about this subject.
Well written write up backed up with thorough research. Thanks and keep it up
hmm
maybe...good post! thx
Bitcoin has died 249 times so far... ,Don't trade the HEADLINES
Thanks for sharing. I've smashed the upvote button for you!
Never thought about it, I just put it down to the news about the social media bans etc.
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Another somewhat related point is that some people held on to the assets until this fiscal year to avoid paying taxes this year. Thus, selling pressure was created this year to delay tax payments until 2019.
I think you're spot on.
This is an opportunity. We gotta follow the Golden rule "buy low and sell high" .. the people selling right now will regret
yes it is
#art4steem to raise the value
Thanks a lot for sharing your valuable post....
Carry on next
Best of luck..
I will still wait for your next post....
good post frends
im terrified about how much i'll have to pay
It seems that IRS is treating crypto more serious than ever before. Anything thinking about making millions without paying taxes, should think twice.
The tax issue creates a lot of stress. I hear people talking about their frustrations or unhappiness with the taxation on crypto and I can see this causing a sell off for sure. I don’t think hat we can ever avoid the tax man. It’s one of the infamous two we can never avoid, death and taxes. The issue in my eyes is the lack of clarity about how this will all work. Define realized profits? Is it the moment it is converted to Fiat? That would make sense to me because as long as you are invested in a crypto your portfolio’s value could change in a heartbeat.
You are right this does provide an excellent opportunity for those who want an entry into crypto market...I myself have bought some ripples @ 0.65$
I like it blog
Thanks for sharing busy
I appreciate your post
What is happening and on April 19.
I think you're right and we'll see prices start to go back up after the 15th of next month. Good time to buy the dip!
This is a great point that you have brought up in this post! Many newer crypto investors cash out around major holidays too like Christmas because they need the money. Tax time is going to be interesting this year and next year because there has been limited advisement from the IRS on how best to file and everything else. Plus, it is something new so many people will try to claim ignorance.
January is Bitcoin's worst month on record. Due to some news or a happening, the coin has tanked in several Januaries past. This January is no different.
What about March? January is long gone :)
This makes perfect sense I cant see people who are highly invested in crypto currency as people who want to do a 1099
While reading this blog @jrcornel, this is the only thing that runs into my mind, "The only thing that is constant in this world is Tax!" ;-)
Perfect storm of tax-day plus seasonal selling. Sentiment is so bad that even Ronnie Moas is becoming less bullish.
Every bull market needs to climb a wall of worry
Makes sense! - Tax Day 2018 in United States of America is Tuesday, April 17 (not April 19th)
thx for the good info!
This market is going through a transformation. Up until this long-lasting Bear run, investors where in this market for quick, large returns. That money has left the market. Right now we are left with the "HODLers". This market needs steady growth from here, not "moonshots" then bottoming out drops. These companies also need to start making progress in the "real world".
nice