As the US tax season draws to a close, Bitcoin (BTC) has broken through important price support to hit one-month lows.
According to CoinDesk statistics, the most valuable cryptocurrency sank to $38,577 during Asian hours, a figure last reached on March 15. $40,000 was critical support, according to analytics firm IntoTheBlock, because considerable purchasing activity had occurred around that level in the past.
Since testing the seas above $48,000 three weeks ago, the cryptocurrency has lost nearly 17% of its value.
Tax-related selling and a shaky macro backdrop appear to have contributed to the market’s downfall. The deadline for submitting 2021 tax returns or requesting an extension to file and pay the tax is Monday, April 18, 2022 for U.S. investors.
Market participants liquidated digital assets during the tax season last year, between January 1 and April 15, according to David Duong of Coinbase in a recent weekly email.
In a Telegram discussion, Jeff Anderson, CIO of quantitative trading company and liquidity provider Folkvang Trading, remarked, “Tax-related selling has undoubtedly had a role in recent weeks.” “However, it’s impossible to determine how much of the deterioration is related to the approaching tax deadline.”
“People were positioning for an end of tax selling Monday,” Anderson said, “but the [continuing climb] in yields has scuppered that.”
According to data provided by graphing platform TradingView, the 10-year Treasury yield jumped to 2.88 percent early Monday, the highest level since December 2018.
Due to strong inflation and the Federal Reserve’s (Fed) promises to deliver rapid-fire rate rises, nominal and real or inflation-adjusted U.S. bond rates have been on a tear in recent weeks.
As a result, risk assets, such as technology stocks and cryptocurrencies, have been hammered.
Bitcoin’s rising connection to equities, according to George Liu, head of derivatives at Babel Finance, might be the most important factor for the drop below $40,000.
To read our blog on “Bitcoin surpassed $41,000, with technical analysts predicting a rebound,” click here.
