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Bitcoin's Rebound Continues After April 17 Tax Day

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A visual representation of the digital Cryptocurrency, Bitcoin. Photo by Chesnot/Getty Images

Tom Lee, Fundstrat Global Advisors’ Head of Research, postulated that Bitcoin&nbsp;would be&nbsp;under pressure due to tax loss selling. He calculated that for every $1 in U.S. dollar selling it could impact the market value (think market cap, not price of Bitcoin) by $20 to $25. Bitcoin’s market cap was about $135 billion towards the end of March, per coinmarketcap.com and during the first two weeks in April it fell to around $115 billion, down 15%. Per Lee’s calculation it would only take $1 billion of U.S. based Bitcoin selling to account for the $20 billion downdraft.

However, Credit Karma had seen fewer than 100 people report cryptocurrency gains out of 250,000 filers per CNBC as of Friday, April 13. It may be that Bitcoin investors are using other services, but if Turbo Tax, H&amp;R Block and tax preparers saw similar low volumes of cryptocurrency reporting, the two week weakness leading up to April 17 in Bitcoin’s price and last week’s rebound could be due to other forces.

Or Bitcoin’s slide could have been a buyer’s strike . They may have been thinking there would be selling to pay a tax bill, so they stayed away until April 17. If any of the downward pressure was due to actual or perceived tax loss selling, that is now past.

[Editor’s note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.] [Author’s note: There is no official price for Bitcoin, so I use round numbers.]

Bitcoin may have found a bottom

From its peak of $20,000 on December 17 last year, Bitcoin has pretty much been in a downtrend except for a few short-term recoveries. It hit a low of $6,400 on February 6 and rebounded to $11,700 on February 20 and $11,500 on March 5, but has not been able to hold onto the gains.

Starting on Monday, April 9, to Thursday, April 12, Bitcoin traded between $6,700 and $6,950 and took a slight dip to $6,800 on that Thursday. As can be seen in the chart below, it then spiked almost $1,000 to $7,800 the same day, paused until April 17 and started an upward trend to almost $9,000 on Saturday.

coinmarketcap.com

Bitcoin 6 month price chart

Bitcoin trading volume has also seen a fairly steady upturn over the past month, except for April 12 and 13, to levels it hasn’t seen since March 21.

Bitcoin to hit $25,000 by the end of the year

Lee believes Bitcoin has turned the corner and should hit $20,000 by the middle of the year and $25,000 by December 31 . His chart includes when Mt. Gox’s trustee started selling Bitcoins to pay back Bitcoin owners and creditors due to it being hacked in February 2014 when 850,000 Bitcoins were stolen, and the SEC starting cryptocurrency and platform probes. I’m sure Lee isn’t expecting Bitcoin to move in a straight line higher, but&nbsp;if incremental selling pressure has eased, it should lead to a higher price.

Tom Lee, Fundstrat Global Advisors

Bitcoin price chart and projection

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A visual representation of the digital Cryptocurrency, Bitcoin. Photo by Chesnot/Getty Images

Tom Lee, Fundstrat Global Advisors’ Head of Research, postulated that Bitcoin would be under pressure due to tax loss selling. He calculated that for every $1 in U.S. dollar selling it could impact the market value (think market cap, not price of Bitcoin) by $20 to $25. Bitcoin’s market cap was about $135 billion towards the end of March, per coinmarketcap.com and during the first two weeks in April it fell to around $115 billion, down 15%. Per Lee’s calculation it would only take $1 billion of U.S. based Bitcoin selling to account for the $20 billion downdraft.

However, Credit Karma had seen fewer than 100 people report cryptocurrency gains out of 250,000 filers per CNBC as of Friday, April 13. It may be that Bitcoin investors are using other services, but if Turbo Tax, H&R Block and tax preparers saw similar low volumes of cryptocurrency reporting, the two week weakness leading up to April 17 in Bitcoin’s price and last week’s rebound could be due to other forces.

Or Bitcoin’s slide could have been a buyer’s strike . They may have been thinking there would be selling to pay a tax bill, so they stayed away until April 17. If any of the downward pressure was due to actual or perceived tax loss selling, that is now past.

[Editor’s note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.] [Author’s note: There is no official price for Bitcoin, so I use round numbers.]

Bitcoin may have found a bottom

From its peak of $20,000 on December 17 last year, Bitcoin has pretty much been in a downtrend except for a few short-term recoveries. It hit a low of $6,400 on February 6 and rebounded to $11,700 on February 20 and $11,500 on March 5, but has not been able to hold onto the gains.

Starting on Monday, April 9, to Thursday, April 12, Bitcoin traded between $6,700 and $6,950 and took a slight dip to $6,800 on that Thursday. As can be seen in the chart below, it then spiked almost $1,000 to $7,800 the same day, paused until April 17 and started an upward trend to almost $9,000 on Saturday.

coinmarketcap.com

Bitcoin 6 month price chart

Bitcoin trading volume has also seen a fairly steady upturn over the past month, except for April 12 and 13, to levels it hasn’t seen since March 21.

Bitcoin to hit $25,000 by the end of the year

Lee believes Bitcoin has turned the corner and should hit $20,000 by the middle of the year and $25,000 by December 31 . His chart includes when Mt. Gox’s trustee started selling Bitcoins to pay back Bitcoin owners and creditors due to it being hacked in February 2014 when 850,000 Bitcoins were stolen, and the SEC starting cryptocurrency and platform probes. I’m sure Lee isn’t expecting Bitcoin to move in a straight line higher, but if incremental selling pressure has eased, it should lead to a higher price.

Tom Lee, Fundstrat Global Advisors

Bitcoin price chart and projection

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