Cryptocurrencies a Bargain Right Now, Pantera Capital Notes as it Warns About ‘Tax Day’
Cryptocurrencies are a bargain, according to digital asset management firm Pantera Capital that says they are for grabs at discount prices in the coming months.
In a very extensive edition of its ‘Blockhain Letter’, Pantera notes that Bitcoin does not look overvalued and the firm remains bullish despite still some possible retraction. The firms comes with a disclaimer:
“That doesn’t guarantee it won’t go down next week. It doesn’t guarantee that it won’t go down a lot more next month, or whenever, but it just means the odds are really high that the markets are at an extreme and will bounce back relatively quickly. In the nine years we’ve been managing money in the blockchain space, I got to admit, there were times I was totally sweating it when the markets were down – this is not one of those times. I think the markets will be right back. I think it’s like weeks or a couple of months until we’re rallying very strongly. We are quite bullish on the market, and we think prices are at a relatively inexpensive place.”
The letter confirms:
“We’ve updated some Bitcoin charts first shown in our June 2021 letter. They confirm our sense that the markets did not get overvalued and are, in fact, very cheap right now.
The year-on-year return never went literally off-the-chart like in past peaks. It’s down -11% year-on-year – during a period when the Fed printed $5 trillion in that period – seems cheap.
Bitcoin’s four-year-on-year return is at the lowest end of its historical range. Again, doesn’t look overvalued.”
With tax season on the horizon, crypto prices could move lower when crypto traders need to sell some of its holdings to pay for their taxes this year, the firm notes:
“Some of crypto selling pressure has been unintended tax positions… There were $1.4 trillion of cryptocurrency capital gains created last year. That could have caused a decent chunk of the recent sales. Tax Day can be important to crypto prices. After the three previous big run-ups – 2013, 2017, and 2020 – and this one, 2021 – Bitcoin peaked 35 days before Tax Day and then declined to a local trough as investors sold off assets to cover taxes accrued in 2020. That makes some sense.”
This ‘Tax Day selling pressure’ is a result of traders unaware of crypto transactions being taxable, Pantera explains:
“A lot of crypto traders are new to investing. You can imagine a person buying as much Bitcoin as they can… And then their tax preparer tells them they owe 34% of the gains in taxes. Since they’re ‘all-in’ on crypto, the only way to raise cash to pay their tax bill is to sell some crypto. Prices fall leading up to Tax Day.”
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Source: igaming
