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Crypto rout 'driven by $25bn capital gain hit'

Apr 06 2018 16:23
Joanna Ossinger, Bloomberg

New York - Selling pressure in cryptocurrencies could ease after tax day.

The April 15 income-tax filing deadline is contributing to crypto’s falling prices as investors who won big betting on the digital tokens sell some of their remaining holdings to pay $25bn in capital-gains levies, Tom Lee, the head of research at Fundstrat Global Advisors, wrote in a note on Thursday.

Bitcoin dropped more than 40% over the past month.

“This is a massive outflow from crypto to dollars,” Lee wrote. “Historical estimates are each $1 of USD outflow is $20-$25 impact on crypto market value.”

Lee says that the $25bn prediction - derived from his estimate that US households had $92bn in taxable gains from cryptocurrencies in 2017 - would represent 20% of capital-gains tax receipts to the US Treasury.

He estimates total capital gains receipts will hit a record $168bn for tax-year 2017. A crypto bull who maintains a year-end price target on Bitcoin of $25 000, Lee sees the selling pressure passing.

“We still like Bitcoin and large-caps,” he said, adding that “while we believe the bear market for alt coins is largely over, we do not see upside for alts until mid-August”.

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