Flash Crypto Market Crash Caused by Tax Season, Not Middle East Conflict

Flash Crypto Market Crash
Flash Crypto Market Crash

NOIDA (CoinChapter.com)— The impending tax season caused a flash crypto market crash as the markets entered the weekend on April 12, with the total market cap dropping over 18% to reach a low near $2.1 trillion on April 13.

Crypto market crash
BTC price action over the past seven days. Source: CoinStats

As a result of the crypto market crash, Bitcoin’s price briefly dropped near $60,000 before bulls entered the market to pare some of the losses. Moreover, the token continued its rally on March 14, though BTC’s start to the current week remained muted.

The Tax Week Impact on Crypto Prices

The US tax deadline is April 15, making April 12 the last weekend before the tax payment deadline. Historically, tax season in the US has prompted investors to liquidate holdings, including cryptocurrencies, to fulfill tax obligations.

The pattern repeated on the April 12 weekend, likely leading to the crypto market flash crash.

Crypto market crash
Several traders highlighted tax week’s impact on the crypto market crash.

The markets saw an uptick in selling activity as taxpayers prepared to settle their dues. This selling pressure was evident in the substantial declines across major cryptocurrencies.

Furthermore, Ethereum and other prominent digital assets dropped in tandem with Bitcoin, echoing the impact of widespread portfolio liquidations and leading to the wider crypto market crash. The phenomenon echoed a broader market trend tied directly to the timing of the US tax week.

Crypto market crash
Bitcoin liquidations spiked over the weekend during the crypto market crash. Source: Coinglass

Market data analytics from Coinglass highlighted a spike in long liquidations, correlating closely with increased sell orders. Between April 12 and April 15, BTC price action liquidated over $452 million in long positions, while short positions saw liquidations worth $173 million.

The uptick in selling pressure was particularly pronounced among US-based crypto exchanges, which saw a higher-than-usual activity level as investors liquidated positions.

Crypto market crash
BTC price action during tax week since 2015. Source: Tradingview.com

Historically, since 2015, the week leading up to the April 15 tax deadline has seen Bitcoin price plunge 60% of the time, while uptrends have been nominal. As such, it would be unwise to discount the impact of the tax weekend on Bitcoin and, therefore, the crypto market’s price action.

Middle East Conflict’s Peripheral Impact on Crypto Market Crash

Simultaneously, the crypto market faced geopolitical tensions in the Middle East, where escalating conflicts added to global economic uncertainty.

Flash Crypto Market Crash, Flash Crypto Market Crash Caused by Tax Season, Not Middle East Conflict
The Middle East conflict also weighed in on the crypto market crash.

Although such international incidents usually impact market sentiments, the specific downturn on the April 12 weekend was less about the conflict and more about its coincidental timing with the US tax season.

Even by Bitcoin’s standards, it was a volatile weekend and one that showed that the world’s most popular cryptocurrency is not insulated from geopolitical shocks. Iran’s drone and missile attack on Israel saw BTC dip below $62,000 – losing almost 8% of its value in a matter of minutes – as fears of an escalation grew.

Neil Roarty, analyst at investment platform Stocklytics, commented
Flash Crypto Market Crash, Flash Crypto Market Crash Caused by Tax Season, Not Middle East Conflict
Anthony Pompliano also noted the influence of tax week on the crypto market crash.

While the Middle East conflict did introduce volatility, the tax-induced sell-offs seemingly overshadowed the impact of the conflict on crypto prices. The market’s reaction to geopolitical tensions was evident but not as pronounced or direct as the sell-off triggered by the tax deadline.

Furthermore, trading data post-conflict news showed temporary dips and rebounds less severe than the tax week’s extended price declines.

While the Middle East conflict undoubtedly contributes to broader market uncertainties, the dramatic flash crypto market crash during this period appears more closely linked to US investors’ tax obligations.

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