Bitcoin is performing well in the market today as it tests the $9,000. The newfound bullish momentum is not a surprise for Fundstrat Global Advisors analyst Tom Lee, who said that tax filings were bringing the cryptocurrency market down and ‘Tax Day’ would eventually trigger an upside move for the bitcoin price.
Bitcoin Reaches $9,069 As Sentiment Improves
The bitcoin price has been steadily rising since April 12 after being buoyed at the $6,500-$7,000 range. The number one cryptocurrency by market cap is up by nearly 40 percent from the April lows as it has already crossed the $9,000 line to print a high at $9,069, according to TradingView.
Tom Lee, head of research at Fundstrat Global Advisors, had previously explained that the tax liability of the massive capital gains obtained by cryptocurrency investors last year was behind the downward market pressure as holders of Bitcoin et al were cashing out to pay taxes.
“The U.S. tax day is behind us (April 17th) and since then, the overall tone in the crypto market has improved. We believe the ‘winter’ is ending for Bitcoin, as the crypto to fiat pressures from tax day subside, and as headline risks seem to be fading”, Tom Lee said in a note to investors.
As cryptocurrencies constitute property, according to the IRS, these are subject to capital gains tax. The 1,300% upward move in 2017 might have resulted in $25 billion in taxes in the United States. The head of research at Fundstrat Global Advisors argued that U.S. households captured 30% of the $590 billion capital gains in 2017 and the $92 billion taxable gains were subject to a 27% rate.
Tom Lee also recommended investors to keep an eye on the CoinsharesCrypto ETF, a leading indicator for bitcoin, which he compared to Punxatawney Phil, a groundhog who predicts whether winter is over based on its shadow.
“We believe large institutional investors globally use this ETF as a way to quickly gain exposure to Bitcoin. Hence when shares rise, big money is buying bitcoin”, Tom Lee added.
Tom Lee predicts Bitcoin will reach $20,000 by mid-year and $25,000 by the end of 2018. The analyst sees Bitcoin at $91,000 by early 2020.
Sentiment in the industry has also improved considerably after news that leading investment funds are entering the cryptocurrency market, including George Soros and the Rothschild family. The Soros Fund Management venture internally approved the trading of virtual coins. Soros has recently called the market a “bubble” and that investors were operating on “some kind of misunderstanding.”