L1 Tokens Recover; Digital Assets to be Subjected to Reporting Practices

Chart of the Day

On Tuesday, the broader crypto market continued on its upward march despite stagnation in the U.S. equity markets and brewing uncertainties with regard to the global macroeconomic outlook. On Monday, BTC managed to surpass the break-even point of $47,201 after a major technical breakout above the $45.5k resistance zone, and is consolidating above the $47.5k handle as of the time of writing. In this region, the largest crypto by market cap is currently building up some serious momentum to charge at the immediate upside resistance near the $48k zone, where a clean breakout above said resistance zone may push the price closer to the $50k psychological barrier. However, the potential of a downside consolidation still remains, as BTC could very well swing to test its support near the $46k level should it fail to crack the overhead resistance.

Nevertheless, BTC's recent rallying momentum seems to have ushered in some bullish sentiments back into the crypto market again, sentiments that ostensibly demarcate the end of the bearish cycle. Historically, the transition from a bear to a bull market is often marked by a major flush-out with at least a 50% drawdown from previous highs (evoking painful memories of November 2018 and March 2020). From the PnL chart, we can see that there have been two such capitulation events within the last 12 months, albeit of smaller magnitudes when compared with the ones that happened in November of 2018 and March of 2020. This goes to show that the narrative surrounding BTC as a viable "hard asset" has in fact matured over the years.

In a similar vein, ETH is changing hands just below the $3,400 level after posting a 2.4% gain in the last 24 hours. Most major altcoins have also extended their gains further, with top performers like LUNA  posting up significant double-digit gains from 24 hours ago. Further, many L1 tokens have recovered from the February slump. In particular, NEAR seems to be leading the L1 recovery charge after experiencing a 50% surge in its value over the past few months on the back of several liquidity catalysts like the Bastion Lockdrop. DOT and LUNA have also seen steady growth in recent times due to new parachain developments and replenished reserves respectively. 

Talk of the Town

The Biden Administration's 2023 budget proposal, one that was released in conjunction with the U.S. Treasury's revenue explanations on Monday, has projected for the U.S.' tax revenue to amount to $11 billion over the next 10 years. They are attempting to achieve this target by subjecting digital assets to several financial accounting and reporting practices. In fact, the Treasury Department has already proposed for a mandate to ensure that all U.S. citizens will report their foreign financial accounts (that are worth more than $50,000 in digital asset holdings) to the government. The proposal also calls for the application of the Foreign Account Tax Compliance Act to foreign users who own accounts in U.S.-based exchanges. Finally, the Treasury is also actively working with the Internal Revenue Service (IRS) to obtain information on offshore cryptocurrency holdings.