Fundstrat strategist Tom Lee says we’re watching a“massive outflow” from cryptocurrency to dollars as America’s tax filing deadline of April 17th nears. According to Lee, cryptocurrency markets could start showing some life again once the deadline passes. Lee’s still on the hook for betting bitcoin would hit $20,000 USD by mid-year and $25,000 by year-end.
Crypto Exchanges Selling, Tom Lee Thinks
Interestingly, Lee is the only Wall Street analyst who regularly reports on bitcoin. As such, he’s saying the current market downturn for bitcoin and its altcoin peers is the result of selloff pressure to meet tax obligations:
“This is a massive outflow from crypto to USD and historical estimates are each $1 of USD outflow is $20-$25 impacts 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 [exceeding] $1 billion.”
If Lee’s right, that would certainly explain the massive sell pressure that’s been dominating the cryptoeconomy for the past few weeks. Both investors and exchanges alike made more profits in crypto than ever before in 2017, and now it’s time for the taxman’s dues.
Crypto Prices to Recover After Tax Day?
Tom Lee’s also developed a new index — the Misery Index — that signals investors when to buy the volatile cryptocurrency bitcoin.
As Lee recently noted, “Regulatory headline risk is still substantial. And sentiment remains awful, as measured by our bitcoin misery index, which is still reading misery.”
Per Internal Revenue Service rules, digital currencies are considered as property, therefore making U.S investors owe capital gains taxes on cryptocurrency investments. According to Lee’s estimates, American crypto traders collectively owe the IRS $25 billion for their trades in 2017.
“Ultimately, we expect bitcoin to find footing after … tax day,” Lee argued. It will need to if his prediction of BTC hitting $20,000 by mid-year is to come to fruition.
Will Tom Lee’s Tax Day prediction come true? Share your views in the comments section below.
Images via AccountingWEB, Business Insider