It was another brutal weekend for cryptocurrencies, with values slashed by double digits across the board – with Bitcoin dipping beneath $7,400 for the first time since the late January sell-off.
Ethereum was also pummelled, even sinking beneath $500, a level it hadn’t seen since December.
Although the markets have rebounded a little on Monday morning as Asian investors eye some bargains, it’s clear downward pressures remain. The reasons would seem to be threefold.
The implications of US tax policy became clear last week as cryptocurrency investors were suddenly facing the prospect of large bills from the IRS.
As Bitcoin and their ilk have been classified as assets not currencies, their sale or even exchange into other coins is liable to capital gains tax. That led to a widescape dumping as investors sought to avoid the IRS.
One investor, according to a post on Reddit, said he now owed $50,000 – even though his cryptocurrency holding was worth less than $30,000.
The tax bombshell came in conjunction with the increased clampdowns by the Federal Trade Commission in the US on initial coin offerings (ICOs) – they accuse two companies of defrauding 30,000 investors around the world with outright scams – and by authorities in South Korea, where cryptocurrency trading as among the most active.
Last week it emerged that three major cryptocurrency exchanges had been raided on charges their owners had transferred cash into their own accounts.
Predictions of a Bitcoin bubble circulated through the community during the surge to $20,000, with graphs and charts identifying the typical moments of “enthusiasm” and “fear” in a trading cycle. It seems the value of Bitcoin is following a tried and trusted pattern and that we’re more likely to see $2,800 before we see $12,800 again.
“There is an element of charting and technical analysis being used in Bitcoin and cryptocurrencies trading, considering the professional bodies now entering the market,” said Daire Ferguson at Irish currency platform AvaTrade Ltd.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.