Main Takeaway: Crypto Prices Crater Over The Weekend
Starting on Friday and lasting throughout the weekend, crypto prices began crashing hard as Bitcoin fell off two cliffs, dropping from the $24,000 range to $22,000, then retesting the $20,000 range. However, this was not just limited to Bitcoin, most other cryptos also retraced the previous two to three weeks of gains, along with stock prices halting their ascents. As mentioned in previous updates, investors and traders should be wary of dead-cat bounces and recovery fakeouts. As a result of the most recent drop, crypto markets declined around 9% to 10%.
Key Stories: IRS Crypto Audits & “Something Worse” Than A Recession
President Biden’s newly passed Inflation Reduction Act caught the eye of many in the crypto space and the general public because of its provisions to give the IRS (the US tax enforcement agency) $80 billion in direct funding, along with hiring 87,000 new IRS agents to enforce US tax laws.
One interesting provision in this law related to crypto will be its provisions on 2022 crypto tax reporting forms. It’s been noted that the language for individuals reporting cryptocurrency transactions, making cryptocurrency investments, and holding cryptocurrencies will be much stricter and invasive.
Generally speaking, tax season is a price dampening time period, and now because US tax laws are clamping down on crypto, we’re likely to see increased volatility around these requirements come the end of 2022 and next spring when tax season arrives.
Secondly, JP Morgan CEO Jamie Dimon stated in a client call that “something worse than a recession is coming.” While there aren’t many details to further expand on Dimon’s thoughts on the statement, many economists, crypto commentators, and politicians have been saying for months that the global economy is already in a recession. After all, the US already reported two consecutive quarters of negative GDP growth, and the UK has signaled similar conclusions on the state of their economy. The main takeaway is investors and traders should keep their eyes peeled on global economic readings and the macroeconomic situation. Cryptocurrency prices will likely move in the same direction as other assets if something more serious like an economic crash were to occur.
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