The US bitcoin investors will be for the first time faced with the necessity to pay capital gains taxes on 2017 trading profits. This led some experts to believe that the reason for the bitcoin’s unimpressive performance is the unwillingness of investors to pay taxes on their profits which are due in April.
If a person sells bitcoin the same year, it is considered as short-term capital gain and can be taxed at 39 percent. Mining of bitcoin and airdrops are also subjects to taxation, although they are considered as ordinary income and the rate depends on the tax’s bracket. In contrast, when a person holds a bitcoin for more than a year and then sells it, they are only subjected to long-term capital gains tax, which is substantially lower (from 15 to 23.8 percent). This might explain the reason for the massive selloff which happened recently. Bradley Rotter, Vice Chairman of Rivetz, cautioned against making too fast judgments:
“I think most people are just connecting those dots, but its an important dot.”
At the time being, Bitcoin prices are at the month’s low due to Google ’s unexpected ban on crypto-related advertising on its platforms. The market is still trying to recover.