Tax liabilities for cryptocurrencies in the U.S. are estimated to total $25 billion, according to Fundstrat. Could this put selling pressure on cryptocurrency markets?
The U.S. Treasury could get a big windfall this tax season from an unlikely new asset class: cryptocurrencies.
According to noted bitcoin bull Thomas Lee of Fundstrat, the total tax liability in the U.S. for cryptocurrencies is estimated to be $25 billion for 2017, meaning cryptocurrencies could be about 20% of total U.S. capital gain tax payments this tax season.
But with expectations high for an enormous cryptocurrency-driven boost to the Treasury, traders have begun to worry that the fast-approaching April 15 tax filing deadline could be adding selling pressure in crypto markets. According to Lee, there is “likely some credence” to those concerns. Here’s why.
In 2017, traders increased the value of the cryptocurrency market by a record $590 billion, which was 60 times the previous record addition of $11 billion in 2016. Of that massive increase in market value, Lee said he estimated 30% of cryptocurrency holders were in the U.S., meaning $187 billion of the market value increase came from domestic traders.
Because of the significant number of U.S. investors paired with astronomical crypto gains in late 2017, there were about $92 billion in taxable gains from digital currencies in the U.S. for the year, Lee said. That could mean U.S. cryptocurrency holders are responsible for a tax liability of $25 billion.
“This is a massive outflow from crypto to USD and historical estimates are each $1 of USD outflow is $20 to $25 impact on crypto market value,” Lee wrote.