Cryptos Sink 13% Over the Weekend as Market Hits Four-Month Low

Crypto assets extended their losing streak over the weekend, as the total market cap briefly fell below February’s bear market lows. The mass liquidation reflects a souring investment climate driven by regulatory uncertainty as well as preparation for tax season.

Crypto Selloff Intensifies

The cryptocurrency market bottomed out at $274.6 billion on Sunday, officially marking the lowest level since November. At the time of writing, the total market was worth $288.7 billion. That represents a decline of nearly 13% from Friday.

With the decline, crypto assets have given back 65% of their record high from early January, when the market was worth more than $830 billion.

Ninety-nine of the top 100 cryptocurrencies traded lower on Sunday, while 85 had reported double-digit percentage losses, according to CoinMarketCap.

Bitcoin touched a daily low of $7,310, but saw its share of the total market rise to 44.6%. The bitcoin dominance index has been rising steadily amid the months-long correction in the market. At the time of writing, one BTC was worth roughly $7,500.

Ethereum plunged more than 20% on Sunday to a low of $455. The second-most valuable digital asset by market cap is now trading at roughly one-third of its record high.

Ripple’s XRP also fell more than 20% to a low of $0.54.

Bitcoin cash, Neo, Stellar and EOS were all down double digits. Litecoin also fell more than 9%.

IOTA was the lone asset to report gains on Sunday, although upside was limited to just 2%.

Crypto Tax Liabilities

The latest crypto crash comes as many investors contend with their reporting duties to the taxman. While volatility is nothing new for cryptocurrencies, the tax liability of trading such assets certainly is. Huge fluctuations in the value of cryptocurrencies have exposed traders to tax bills that their accounts may no longer support.

The U.S. Internal Revenue Service (IRS) has indicated that anything purchased via cryptocurrency may be taxed as capital gains. In other words, anyone who has cashed out their coins or used their digital wallets to pay for goods may have capital gains to report.

The IRS is giving special attention to cryptocurrencies after the agency concluded that only 800 taxpayers reported bitcoin gains between 2013 and 2015. Complicating matters is the fact that cryptocurrency exchanges have not been required to issue 1099 disclosure forms, which are the official documents for reporting earnings other than wages. In November, a U.S. district court judge in California ordered Coinbase to identify traders with accounts worth at least $20,000 over hat period.

Some investors have taken to Reddit and social media in search for answers about their tax liability. One Reddit contributor recently started a discussion entitled, “I just discovered that I owe the IRS $50k that I don’t have, because I traded in cryptos. Am I fucked?”, where they described their massive tax liability after unloading $120,000 worth of bitcoin to purchase other coins. The thread, which was started three days ago, has received nearly 1,800 responses.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi