Pantera Capital Says Crypto Assets Are ‘Very Cheap’ Right Now, Warns This Annual Event Could Depress Prices

Digital asset investment firm Pantera Capital says that cryptocurrencies are currently trading at discount prices.

The firm says that, despite dropping to around $40,000 from an all-time high of nearly $70,000 in November, Bitcoin (BTC) was not overvalued.

“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.”

Pantera says that prices could even go lower because of the tax season. The firm explains that crypto traders may sell holdings to pay for their taxes due on April 18th this year.

“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.”

Pantera says that the selling pressure may be attributed to the large number of traders who are unaware that crypto transactions are taxable.

“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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