Crypto may be collapsing because of tax time woes
Every year, during January, the cryptocurrency market takes a significant hit in terms of overall value.
As the global cryptocurrency market continues to suffer tumbling price movements, industry experts and social commentators have been speculating as to what is causing the current digital currency downgrade.
Much of the social media chatter pointed to fresh reports that China was imposing new crypto regulations. That was largely fueled by a Reuters report quoting a senior Chinese banking official who said that centralized trading of virtual currencies would be banned in China. Nonetheless, crypto dealings continue to persist.
A number of the world’s central banks, and the governments responsible for them, have called for tighter regulation of cryptocurrencies in order to prevent misuse, deter anonymous trading and boost transparency.
However, there might be a simpler explanation for the crash. Every year, during the month of January, the cryptocurrency market takes a significant hit in terms of value, as can be seen in the market cap charts below.
The theory was proposed by a crypto trader on reddit through a series of graphs dating back four years.
The pattern may suggest that the digital currency market is being clobbered annually in January as a result of individuals converting assets in order to have enough fiat currency to cover what they owe on their tax returns.
The new United States tax code – introduced January 1, 2018 – excludes cryptocurrencies from a previous legal loophole and now considers all trades a taxable event. Since 2014, the Internal Revenue Service (IRS) has said virtual currency is treated as property for US federal tax purposes, issuing a guide for proper implementation.
One Twitter user also noted the trend, followed by a suggestion that a recovery would follow the dip.
At the same date every year the bitcoin crashes: 2015 – Low was Jan 15
2016 – Low was Jan 16
2017 – Low was Jan 12
2018 – Low ….#btc #hodl #back #recover #market #CryptoNews #cryptocrash
And it recovers stronger than ever
— Ahmed Saeed (@MidaAcura) January 16, 2018
However, it’s important to note that there is no statistical evidence to suggest that tax season is the definitive reason the market fluctuates so wildly in January. Americans have until mid-April to submit their tax returns.
It’s essential to understand your income bracket and it’s easy to file your taxes online quickly and easily.