Bitcoin and Crypto Talk (Merged)(includes NFT)

RazorSaint said
I'm invested solely in bitcoin 99% of the time, but I want to be able to join the party when Litecoin or Ethereum experience large surges like they did the last couple of days. The downside to Coinbase is they currently only offer 3 currencies - Litecoin, Ethereum, and Bitcoin, whereas other exchanges offer dozens (I think Bittrex is around 200).

l heard an interesting comment yesterday about the movement of money across the different currencies. Everyone should be aware that the IRS views cryptocurrency as capital assets (as opposed to a currency like FOREX), so capital gains taxation rules apply (mainly short-term versus long-term gains). And a gain is realized upon the sale transaction, even if the sale is in a currency other than USD. For example, if you convert bitcoin to litecoin on an exchange, that transaction ends the ownership of the bitcoin as a capital asset and the gain (if any) is taxed.

Leaving aside the exchanges for a moment, there is no obvious way that IRS would be aware of cryptocurrency gains. While it is true that it would be against the tax code and potentially criminal to fail to report any cryptocurrency capital gain, the fact is that many Americans don't report taxable income that beyond the knowledge of the IRS.

As a result, the comment I heard was that many bitcoin investors who have seen substantial gains are selling out of bitcoin and moving those profits into other cryptocurrencies that haven't seen the same meteoric rise. Not only does this present more opportunity for gains, it keeps the money out of the bank (where it could generate a report to IRS). Based on this premise, if you start to see bitcoin slip while another currency is rising, that could be the reason.

Of course, it bears mentioning that some of the big exchanges (Coinbase for example) might easily be reporting to IRS - as they are trying to operate with a big footprint and with legitimacy. With that comes the desire to avoid regulatory scrutiny and being seen as aiding the avoidance of tax is an obvious way to get increased scrutiny.