Bitcoin and Crypto Talk (Merged)(includes NFT) (1 Viewer)

[DCSaints_Fan]

In investing in Bitcoin/cryptocurrency I'm starting to understand the need for them I initiated a transfer of my funds from my Chase account to Coinexchange last Thursday, and it still hasn't shown up in my wallet as of today

 

[RazorSaint]

I will say that it's fun as hell to invest in crypto. If you have money to invest for fun, I suggest dropping a few hundred in (or if you can afford, a few thousand). The daily swings are insane. It's like the stock market on meth. What can take days or years to materialize with traditional stocks can take hours or days with cryptocurrency.

If it disappears tomorrow I'd be disappointed but I've had a hell of a time.

 

[superchuck500]

Where are y'all storing your coin? I read that it's not recommended to store coin in your wallet on the exchanges. Move it to separate storage (the most secure being something like a portable drive you can secure on your own, or even by "paper" storage).

 

[RazorSaint]

Where are y'all storing your coin? I read that it's not recommended to store coin in your wallet on the exchanges. Move it to separate storage (the most secure being something like a portable drive you can secure on your own, or even by "paper" storage).

I have an electrum wallet on my PC with the private keys stored off net. I do some wheeling and dealing so I keep a lot of my funds on Coinbase, but for extra security I use two factor authentication (2FA), so in addition to a password I have to enter a code from my google authenticator app on my smartphone in order to access my account, transfer funds to an external wallet, etc. 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).

BUT, what you said is true. If you don't plan on trading and just want to invest and leave your money in a particular currency, I'd suggest downloading a wallet (I like Electrum) and storing your currency there. Just make sure and store your wallet's private key somewhere external to that pc (usb drive, piece of paper stored in safe deposit box, etc) so if the PC crashes, it doesn't take your currency with it.

 

[superchuck500]

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.

 

[RazorSaint]

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.

Money flowing out of bitcoin and into alts happens all the time. It's happening now. When bitcoin hits a lull or dip, money typically flows into the altcoins and they see a spike. That's what happened the past few days. Eventually, bitcoin will most likely go on another run, and we'll see the alts dip as money pours back into bitcoin.

The govt is obviously interested in getting their piece of the pie. They asked Coinbase to provide all of their customer records, but Coinbase took them to court and ended up only having to provide the top 3%. I think I read that was people who had cashed out 6 figures or more.

At any rate, if I have any profits left when I decide to call it quits, I'll report the gains just to cover my ***. Or at least I'll talk to a tax professional about it and take their advice.

 

[superchuck500]

Money flowing out of bitcoin and into alts happens all the time. It's happening now. When bitcoin hits a lull or dip, money typically flows into the altcoins and they see a spike. That's what happened the past few days. Eventually, bitcoin will most likely go on another run, and we'll see the alts dip as money pours back into bitcoin.

The govt is obviously interested in getting their piece of the pie. They asked Coinbase to provide all of their customer records, but Coinbase took them to court and ended up only having to provide the top 3%. I think I read that was people who had cashed out 6 figures or more.

At any rate, if I have any profits left when I decide to call it quits, I'll report the gains just to cover my ***. Or at least I'll talk to a tax professional about it and take their advice.

I hear you.

To be truly compliant, I think you have to consider each transaction as a taxable event. For instance, if you bought $2,000 worth of BTC in May, and then, when the BTC was worth $8,000 in November, you used all of it to purchase LTC, that's a taxable capital gain (of $6,000). And because you held the asset for less than one year, its a short-term capital gain that is treated as ordinary income . . . and taxed at your overall ordinary rate, whatever that may be.

Even though you never converted the holding back to cash (instead to you went BTC to LTC), it's still likely to be seen by the IRS as the sale of a capital asset to purchase a new capital asset. This is not a "like-kind" trade wherein the basis in the original acquisition (BTC) is then transferred over to the new asset (LTC) but not considered a taxable event.

Apparently some in the crypto world want to believe that the IRS would treat coin-to-coin trades as "like-kind" but the rationale is very suspect - and probably doesn't hold up to meaningful analysis. Further, just because the IRS hasn't expressly stated it's not a like-kind trade doesn't give investors a pass to treat it that way until IRS clarifies. The IRS could simply say "No, there's no real support for you conclude it's a like-kind trade, so you shouldn't have presumed you could treat it that way" and apply penalties and interest for unreported gains.

It certainly appears that the prudent course is to treat any divestiture of cryptocurrency (even when used to buy other coin - or, in other words "convert" it to another kind) as a sale of a capital asset. As such, you have to figure out the cost basis (on a first-in, first-out method) and compute the capital gain . . . then apply capital gain treatment based on whether it is short or long term. In other words, if you have any transactions in any given year where you realized a gain on the transaction, you have to calculate the gain and report it in your return for that year. Even if you never returned the investment to USD and put it in the bank.

If you trade a lot, that's a pain in the ***. You would have to go through your trade ledger and compute it (or there are programs out there that will do it for you if you download your trade ledger as a CSV file.

Sources:
https://www.forbes.com/sites/greats...oves-for-cryptocurrency-traders/#62081f741c17
https://greentradertax.com/cryptocurrency-traders-risk-irs-trouble-with-like-kind-exchanges/

 

[DomePatrol2005]

looking to get on Monero, Verge, Dash, and zcash

 

[SaintInBucLand]

The big thing that bothers me about these cryptocurrencies is the fact people can avoid taxes with them.

 

[superchuck500]

The big thing that bothers me about these cryptocurrencies is the fact people can avoid taxes with them.

People can avoid tax with fiat currency too. If you transact everything in cash dollars, and keep it out of regulated bank accounts, you can "avoid" tax.

But the risk is the same with crypto as it is with regular cash. There are ways that the IRS can discover taxable activity and there are penalties that can vary based on the behavior of the taxpayer. When the taxpayer is deliberately trying to hide taxable activity from the IRS, those penalties become most severe.

 

[SaintInBucLand]

People can avoid tax with fiat currency too. If you transact everything in cash dollars, and keep it out of regulated bank accounts, you can "avoid" tax.

But the risk is the same with crypto as it is with regular cash. There are ways that the IRS can discover taxable activity and there are penalties that can vary based on the behavior of the taxpayer. When the taxpayer is deliberately trying to hide taxable activity from the IRS, those penalties become most severe.

Are you arguing against government regulation of cryptocurrencies? It would seem to me that you are. Regulation is going to be needed as cryptocurrencies become more mainstream. It's mostly wealthy people involved in the upper echelons of these currencies and we all know what happens when the wealthy are involved in unregulated activities.

 

[superchuck500]

Are you arguing against government regulation of cryptocurrencies? It would seem to me that you are. Regulation is going to be needed as cryptocurrencies become more mainstream. It's mostly wealthy people involved in the upper echelons of these currencies and we all know what happens when the wealthy are involved in unregulated activities.

I presented no such argument. I merely pointed out that your concern about use of cryptocurrency to avoid tax could be equally applied to physical, fiat currency.

I don't disagree with the premise that there's a regulatory need in cryptocurrency. But I also think that one of the fundamental aims of cryptocurrency is to be beyond the reach of regulators. That's not to say that it can't be regulated, at least in so much as how Americans and American institutions are involved with it. But I think that fundamental nature of cryptocurrency can make regulation challenging - and, in the end, consensual. In other words, those who want to be compliant will be, but those who don't want to be and are capable of pulling it off, will be able to avoid it. But that can be said for many things.

 

[RazorSaint]

I hear you.

To be truly compliant, I think you have to consider each transaction as a taxable event. For instance, if you bought $2,000 worth of BTC in May, and then, when the BTC was worth $8,000 in November, you used all of it to purchase LTC, that's a taxable capital gain (of $6,000). And because you held the asset for less than one year, its a short-term capital gain that is treated as ordinary income . . . and taxed at your overall ordinary rate, whatever that may be.

Even though you never converted the holding back to cash (instead to you went BTC to LTC), it's still likely to be seen by the IRS as the sale of a capital asset to purchase a new capital asset. This is not a "like-kind" trade wherein the basis in the original acquisition (BTC) is then transferred over to the new asset (LTC) but not considered a taxable event.

Apparently some in the crypto world want to believe that the IRS would treat coin-to-coin trades as "like-kind" but the rationale is very suspect - and probably doesn't hold up to meaningful analysis. Further, just because the IRS hasn't expressly stated it's not a like-kind trade doesn't give investors a pass to treat it that way until IRS clarifies. The IRS could simply say "No, there's no real support for you conclude it's a like-kind trade, so you shouldn't have presumed you could treat it that way" and apply penalties and interest for unreported gains.

It certainly appears that the prudent course is to treat any divestiture of cryptocurrency (even when used to buy other coin - or, in other words "convert" it to another kind) as a sale of a capital asset. As such, you have to figure out the cost basis (on a first-in, first-out method) and compute the capital gain . . . then apply capital gain treatment based on whether it is short or long term. In other words, if you have any transactions in any given year where you realized a gain on the transaction, you have to calculate the gain and report it in your return for that year. Even if you never returned the investment to USD and put it in the bank.

If you trade a lot, that's a pain in the ***. You would have to go through your trade ledger and compute it (or there are programs out there that will do it for you if you download your trade ledger as a CSV file.

Sources:
https://www.forbes.com/sites/greats...oves-for-cryptocurrency-traders/#62081f741c17
https://greentradertax.com/cryptocurrency-traders-risk-irs-trouble-with-like-kind-exchanges/

Yeah, I'll just have to see how all this plays out. My god that would be a pain in the ***. NOW, if I'm cashing out 150k, that is a PITA I'm ok with. If I'm cashing out 20K...I'd hope I can just pay taxes on the conversion back to USD. I've literally made dozens if not hundreds of transactions between currencies over the past 5 months.

 

[superchuck500]

Yeah, I'll just have to see how all this plays out. My god that would be a pain in the ***. NOW, if I'm cashing out 150k, that is a PITA I'm ok with. If I'm cashing out 20K...I'd hope I can just pay taxes on the conversion back to USD. I've literally made dozens if not hundreds of transactions between currencies over the past 5 months.

That article says there programs that can compute if all for you if you import your transaction file from the exchange.

Day traders have to go through this same process.

 

[DomePatrol2005]

anyone into mining coins? alternate from bitcoin? I am looking to get about 50 - 100 computers mining several hours a day. DM?