Bitcoin Price Crashed in Mass Selloff as Crypto Owners Try to Avoid Taxes

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Bitcoin Price Crashed in Mass Selloff as Crypto Owners Try to Avoid Taxes

Bitcoin prices fell this week as a result of a rush of pessimistic cryptocurrency headlines, but the mass sell-off might just be due to speculators attempting to escape the Tax Man.

According to tax experts, cryptocurrency users may be aggressively selling their holdings in order to avoid paying capital gains taxes, which may be large in certain cases owing to bitcoin’s skyrocketing values in 2017.

“Younger folks who don’t think about taxes or have never invested before are surprised.” “CNBC spoke with Cathie Wood, CEO & CIO of ARK Invest. “People made large profits last year and don’t have enough crypto to cover them.””

OnlineTaxman’s founder and CEO, Vincenzo Villamena, concurred. “I saw folks bet the farm on it,” he observed. “They’re saddled with a big tax obligation and are working out payment arrangements or selling off crypto.”

According to Bradley Rotter, vice chair of Rivetz, the financial gains achieved by US investors from their cryptocurrency holdings might pay for President Trump’s border wall. (See also: Are Bitcoins Taxable?)

“The amount of capital gains from just U.S. investors in the rise of crypto pays for the damn wall. I think most people are just connecting those dots but its an important dot.”

Bitcoin Prices Started Crashing After IRS News Went Public

This “tax evasion” argument seems to be supported by circumstantial evidence.

Indeed, the prices of bitcoin and its siblings began to fall in lockstep in late February, just after prominent crypto exchange Coinbase was compelled to provide over data on its users. (For more, see IRS Wants to Tax Bitcoin Gains: Orders Coinbase to Turn Over User Data.)

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Bitcoin prices were hovering at $8,204.86 as of this writing, down 0.63% in the previous 24 hours. According to CoinDesk, the current low for a BTC token is $7,924.

The IRS won a court order in November 2017 requiring Coinbase to give over taxpayer IDs, names, birth dates, addresses, and transaction information for users who performed transactions worth more than $20,000 on its platform between 2013 and 2015.

Many Coinbase clients were enraged that the exchange had not provided them with more early warning that they would be required to pay taxes on their crypto investment profits.

Others believed that the decentralized and uncontrolled structure of cryptocurrencies rendered investments tax-free, however this seems to be incorrect.

Google Bans Crypto Ads, Joining Facebook

Another reason that led to cryptocurrency price declines this week was the announcement by Google that it would prohibit cryptocurrency advertising, citing the need to limit advertisements from financial products that are “often linked with misleading or deceptive promotional tactics.”

The decision comes after Facebook imposed a similar prohibition on bitcoin marketing in January 2018. (For more, see Google Bans Crypto Ads.)

Bitcoin values, as well as those of its sister virtual currencies, will continue to fall as authorities across the globe increase their scrutiny of the burgeoning asset class. So strap up, because this is going to be a rocky trip. (See also: Vladimir Putin Will Make Using Bitcoin as a Money Substitute Illegal.)

Investing in cryptocurrencies and Initial Coin Offerings (“ICOs”) is very dangerous and speculative, and neither Investopedia nor the author suggest that you do so. Because every person’s circumstance is different, a knowledgeable specialist should always be contacted before making any financial choices. Investopedia makes no guarantees or warranties about the accuracy or timeliness of the information provided on this site. The author owns no cryptocurrencies as of the day this post was published.

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