According to Delphi Digital, Bitcoin prices come under pressure each year in January and March as investors sell BTC to cover tax liabilities.
January marks the start of a new US tax season. It is also historically the time when Bitcoin price dynamics are slowing down compared to other months of the year. Some analysts believe this is not a coincidence. From 2014 to 2020, the bitcoin price declined in January for four years out of seven monitored, and in March for six years out of seven. According to Delphi Digital, the average declines over these months were 5.24% and 12.59%, respectively.
“As the new tax season approaches, Bitcoin has historically performed lower than the rest of the months. This is by no means a forecast on a separate basis, but it is important to note it, ”said Paul Burlage, analyst at Delphi Digital.
Bitcoin is currently trading at around $ 32,000, down 0.6% over the past 24 hours. According to Delphi Digital’s January BTC Prospects Report, one of the main reasons for the recent drop in recent days is that “those investors and traders who have made significant profits from cryptoasset trading in the past year are likely to be forced to sell at least some of their assets. to cover the expected tax payments ”.
Data compiled by Delphi Digital shows that the return on the BTC / USD pair in January and March has been predominantly negative since 2014.
“It’s hard to pinpoint exactly how much pressure to expect from sellers, and some jurisdictions are more favorable to capital gains than others,” said Kevin Kelly, co-founder and head of macro investment at Delphi Digital. “But Bitcoin alone added over $ 400 billion to its market capitalization last year. A decent chunk of that income went to speculators and traders who may have already made a profit or funneling income elsewhere in the cryptocurrency market, leading to a rise in the tax base.”
Recall that in December 2020, the US Internal Revenue Service (IRS) added a clause about cryptocurrencies to the main part of Form 1040. Previously, the question of ownership of cryptoassets was in Appendix 1, which was not filled out by all taxpayers.
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