Charles Hoskinson, Cardano‘s co-founder, drew an comparison between the current crypto market and the historical tax-induced sell-offs in the United States, as expressed in a social media post on X (previously known as Twitter).
Annual tax deadlines prompt a significant selling of assets on April 15th. Following this, the IRS (referred to as Ivan the Terrible in this analogy) reflects on the taxes it has collected from taxpayers (its “son”).
Hoskinson’s Tax Deadline Sell-offs
In the past 24 hours, the cryptocurrency market has experienced significant declines, primarily caused by broader economic issues and heightened geopolitical tension. Traditionally, crypto values tend to dip around Tax Day in the United States, which falls on April 15th.
In the weeks prior to the deadline, the stock’s price has encountered resistance and experienced irregular trading patterns. The cryptocurrency market currently exhibits this same volatility, with significant withdrawals taking place over the last day. This trend can be traced back to 2019 but has become more pronounced due to the increasing number of traditional investors entering the cryptocurrency sector.
In the fourth quarter of 2023, there was a rise in the number of traditional investors adding more funds to the market due to the filing of applications for a spot Bitcoin (BTC) Exchange-Traded Fund (ETF). This led to greater profits for the asset.
Analyst Explains Trend
Based on Tom Lee’s perspective at Fundstrat, there could be manufactured selling pressure on stocks due to the approaching tax deadline. Historical data indicates that bullish markets experience a decline prior to tax day. This trend is observable in the current performance of both stocks and cryptocurrencies, which experienced significant rallies in the previous year for diverse reasons.
Lee attributed the recent downturn in the stock market to investors withdrawing funds to cover their capital gains from prior years.
“Investors are compelled to sell their stocks before taxes are due in order to generate cash for paying capital gains. Consequently, stock prices may decrease leading up to tax day.”
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2024-04-13 22:33