EMERGING TECH
EMERGING TECH
EMERGING TECH
IRS crackdown puts the fear of God into bitcoin investors
Reports that the Internal Revenue Service is coming after bitcoin investors has put the fear of God into the market, causing a selloff that pushed the price of the cryptocurrency down by thousands of dollars over the last few days.
The fears relating to a crackdown by America’s taxman have their roots in a court decision in November. In that case, cryptocurrency exchange Coinbase Inc. was ordered to hand over customer records to the IRS after losing a case filed against it by the Department of Justice in November 2016. The records pertained to all U.S. Coinbase users and their transactions between 2013 and 2015, with the IRS arguing that customers had failed to detail their returns from bitcoin trading in their tax returns.
Adding to the possibility of an IRS crackdown on previous bitcoin profits, other reports noted that some bitcoin investors may have woken up to the fact that they are liable to pay capital gains taxes on cryptocurrency profits.
“For younger people who don’t have taxes top-of-mind, or have never invested before, they’re shocked,” Cathie Wood of ARK Invest told CNBC. “People had huge gains last year, and they don’t have enough in crypto to pay those.” Vincenzo Villamena, founder and chief executive officer of OnlineTaxman.com added that “I see people that bet the farm on it…. They’re stuck with a large tax bill and they’re doing payment plans, or they’re selling off crypto.”
Bitcoin itself has fluctuated this year, trading mostly below the $10,000 mark after coming close to hitting $19,000 late last year. After bottoming out at $6,363.97 on Feb. 5, the cryptocurrency grew last month through a minor bull run that came to an end Feb. 22 after peaking at just above $11,000. The currency vacillated for the following two weeks before starting a proper bear run March 5, with negative news such as a crackdown in Japan adding to investor uncertainty.
In trading Sunday, bitcoin hit a bottom of $7,364.45 until buyers entered the market, driving the price back up to $8,212.77 as of 9:30 p.m. EDT.
Image: Wikimedia Commons
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