Cryptocurrency taxes are not just heavy to the pocket. Besides losing some part of your currency, it is now learnt that the application of cryptocurrency taxes has a rather harsh effect on the price of coins, according to Thomas Lee an analyst at Fundstrat Global Advisor.
The analyst started by explaining the massive pressure put on the prices because of the huge amounts of selloffs by investors seeking to reduce their tax liabilities. President Trump’s new tax law scheme empowers short-term holding by applying a lower tax rate to them. On the other hand long-term holdings, held for at least a year, are taxed as high as 20%.
Cryptocurrency exchanges are expected to contribute to the selloff because they keep most of their working capital in bitcoin and ethereum. Lee said they has a net income of more than a billion dollars last year but now would have to sell some portion of their cryptocurrency holdings in order to meet tax obligations.
Also read : Tom Lee on Bitcoin : HODL ONN!!
Lee’s firm estimates that the American authorities may gain as much as $25 billion in capital gains taxes this year.According to him, capital gains from trading of cryptocurrencies and stocks last year amounted to $1.04 trillion. He said,
“This is a massive outflow from crypto to USD and historical estimates are each $1 of USD flow is $20 to $25 impact on crypto market value,”
However a little matter of relief is that Lee doesn’t expect the selloffs to continue after April 17. This can provide a good time for sustained recovery of markets.
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