- Tax Day is hanging over US investors, and it's one reason behind bitcoin's latest sell-off.
- That's according to an investor letter penned by Pantera Capital, a crypto hedge fund based in California.
Uncle Sam is to blame for bitcoin's recent sell-off.
The cryptocurrency declined by nearly 50% in March, from more than $11,500 to $6,500. Recently, it started picking up some steam, spiking by nearly a $1,000 Thursday. It was last trading close to $8,000.
Pantera Capital, a cryptocurrency hedge fund with nearly $800 million in assets under management, said in an investor letter dated April 11 that Tuesday's deadline for filing taxes in the US is connected to recent selling pressure across the market for digital currencies.
"I could imagine that a portion of the selling pressure on the market in general has been unintended tax positions," the letter said.
Investors are required to pay taxes on their cryptocurrency investments if they sold their digital-coin holdings at a higher price than they bought them. But since many cryptocurrency exchanges don't send customers tax documents, many may not even know they have to pay taxes on their coins - or how much.
"Imagine a trader actively buying and selling BTC, ETH, XRP, etc.," Pantera said. "Great year. Made a ton of money. Kept it all in the markets. Come the spring their accountants tell them that every sale at a profit created a taxable gain."
In order to pay the taxes owed on those gains, investors could have sold off some of their coins. Thus contributing to selling pressure.
Fundstrat's Tom Lee predicted in a note to clients at the beginning of April that selling pressure would alleviate after Tax Day.
But a few things could go wrong. "Regulatory headline risk is still substantial," Lee said. "And sentiment remains awful, as measured by our bitcoin misery index, which is still reading misery."
Bitcoin has tumbled by more than 40% since the beginning of the year.
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