Current Dip Related to Tax Liabilities - Analyst Tom Lee

[jaysabi]

According to a recent article on CNBC, Tom Lee is attributing the current price weakness to selling by American consumers and crypto exchanges to satisfy tax liabilities. At least this is an interesting theory, but keep in mind he's only speculating like everyone else.

Key (speculative) points from Lee:

• U.S. households likely owe $25 billion in capital gains taxes for their cryptocurrency holdings
• Additional selling pressure by crypto exchanges sitting on over a billion dollars in profit denominated in btc/eth and are converting to USD to satisfy tax obligations
• tax-related selling represents a massive outflow from crypto to USD and historical estimates are each $1 of USD outflow is $20-$25 impact on crypto market value
• Expects btc to find footing after April 17
• Expects btc to reach $20,000 by mid-year and $25,000 by year-end

Src: https://www.cnbc.com/2018/04/05/wall-streets-tom-lee-predicts-massive-outflow-from-cryptocurrencies-ahead-of-tax-day.html

He's got three essentially short term predictions that will be easy to track, which is the part I'm most interested in.

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[Loveboard]

This is actually an interesting idea. But I'm not aware of any stock broker who would stop trading stocks just because of tax laws.

I think the theory holds weight for amateur crypto gamblers trying to make it big by buying in without any trading or stock experience.

But to be honest the crypto tax implications are no different than wall street taxes. You pay per trade, and you pay for overall capital gains.

To be honest, if you made 100x from a $10,000 investment in some alt, then you really pay only 30 to 40% capital gains tax if you've only held onto it for less than a year. That's not really that bad.

[amishmanish]

Where does that figure of 1 USD outflow resulting in 25 USD drop in value comes from??

Also, I don't know which dip do we call the current dip?? LOL..
Let bitcoin go where it wants to go. A bottom may just be where it wants to be before everyone starts to smother it with attention and adulation once it starts rising up. Just let it rest.

On a more serious note, If the tax liabilities really turn out to be significant then can we expect US Govt and IRS to be a bit more accommodating as well as encouraging of bitcoin, judging how people investing into them gets them taxes.
I am hoping for the SEC to come clean on ICO regulations and maybe provide a way to remove the clouds of doubts and scams when it comes to people raising money for ICOs. A few legitimate, hard-working startups, typical of Silicon valley that use a proper ICO and then deliver will do a world of good for crytpocurrency and bitcoin than hundreds of the ones that hype incredibly and then go silent on telegrams the day their ICO ends.

[jaysabi]

This is actually an interesting idea. But I'm not aware of any stock broker who would stop trading stocks just because of tax laws.

I think the theory holds weight for amateur crypto gamblers trying to make it big by buying in without any trading or stock experience.

But to be honest the crypto tax implications are no different than wall street taxes. You pay per trade, and you pay for overall capital gains.

To be honest, if you made 100x from a $10,000 investment in some alt, then you really pay only 30 to 40% capital gains tax if you've only held onto it for less than a year. That's not really that bad.

Bitcoin is treated differently than stocks. It's taxed as property meaning every transaction with Bitcoin is a taxable event. If you bought Bitcoin and held it, then sold it for a gain, that would be the same as stocks. If you bought Bitcoin and converted to an alt, you would immediately owe tax on the value of the conversion. Then if you held the alt for a time and converted it back, you would owe tax again on the conversion. Then if you sold it for a gain, you would also owe capital gains tax. So all these transactions people have racked up in the last year have created a tax liability they have to pay now, even though they may not have sold any Bitcoin. So Lee's theory is we're seeing all these people liquidate Bitcoin holdings so they can pay their tax liabilities.

[Loveboard]

This is actually an interesting idea. But I'm not aware of any stock broker who would stop trading stocks just because of tax laws.

I think the theory holds weight for amateur crypto gamblers trying to make it big by buying in without any trading or stock experience.

But to be honest the crypto tax implications are no different than wall street taxes. You pay per trade, and you pay for overall capital gains.

To be honest, if you made 100x from a $10,000 investment in some alt, then you really pay only 30 to 40% capital gains tax if you've only held onto it for less than a year. That's not really that bad.

Bitcoin is treated differently than stocks. It's taxed as property meaning every transaction with Bitcoin is a taxable event. If you bought Bitcoin and held it, then sold it for a gain, that would be the same as stocks. If you bought Bitcoin and converted to an alt, you would immediately owe tax on the value of the conversion. Then if you held the alt for a time and converted it back, you would owe tax again on the conversion. Then if you sold it for a gain, you would also owe capital gains tax. So all these transactions people have racked up in the last year have created a tax liability they have to pay now, even though they may not have sold any Bitcoin. So Lee's theory is we're seeing all these people liquidate Bitcoin holdings so they can pay their tax liabilities.

But isn't that how forex works too? Why is bitcoin treated as property and not as currency? It makes no sense, especially because it's so highly convertible.

But you could be right. But from my understanding of property tax laws, it's not exactly taxed with every trade. It's only if you convert the property to CASH. Trading bitcoin for alts, isn't trading for cash, it's trading for crypto, which is considered property. A taxable event might only be if you're at gdax or similar exchange, where you trade btc for USD / fiat.

That said, I see that people are selling bitcoin to pay taxes then?

[warrior333]

I could agree with you. It seems very logical. But I'm not sure that the tax liabilities of bitcoin users in the US are so huge. Capitalization of crypto-currencies have lost about half. You think all that money went to pay the taxes? I highly doubt that. There's another reason. The fall in prices began after the appearance of futures. I think that's the reason.

[jaysabi]

This is actually an interesting idea. But I'm not aware of any stock broker who would stop trading stocks just because of tax laws.

I think the theory holds weight for amateur crypto gamblers trying to make it big by buying in without any trading or stock experience.

But to be honest the crypto tax implications are no different than wall street taxes. You pay per trade, and you pay for overall capital gains.

To be honest, if you made 100x from a $10,000 investment in some alt, then you really pay only 30 to 40% capital gains tax if you've only held onto it for less than a year. That's not really that bad.

Bitcoin is treated differently than stocks. It's taxed as property meaning every transaction with Bitcoin is a taxable event. If you bought Bitcoin and held it, then sold it for a gain, that would be the same as stocks. If you bought Bitcoin and converted to an alt, you would immediately owe tax on the value of the conversion. Then if you held the alt for a time and converted it back, you would owe tax again on the conversion. Then if you sold it for a gain, you would also owe capital gains tax. So all these transactions people have racked up in the last year have created a tax liability they have to pay now, even though they may not have sold any Bitcoin. So Lee's theory is we're seeing all these people liquidate Bitcoin holdings so they can pay their tax liabilities.

But isn't that how forex works too? Why is bitcoin treated as property and not as currency? It makes no sense, especially because it's so highly convertible.

But you could be right. But from my understanding of property tax laws, it's not exactly taxed with every trade. It's only if you convert the property to CASH. Trading bitcoin for alts, isn't trading for cash, it's trading for crypto, which is considered property. A taxable event might only be if you're at gdax or similar exchange, where you trade btc for USD / fiat.

That said, I see that people are selling bitcoin to pay taxes then?

I don't know why except that the IRS classifies Bitcoin as property and not as a currency. In some regards that makes sense. Bitcoin is intended to be a currency, but almost nobody actually uses it as one. It's predominantly used as a speculation vehicle or gambling instrument. I'm. It entirely sure how forex taxes work. I guess I would have assumed you have to pay taxes on gains in USD, but if you were to receive a bunch of euros, you would have to pay tax on the US dollar equivalent as income. If that's true, that's essentially how the IRS treats Bitcoin.

[Loveboard]

So I'm revisiting this thread as tax deadline in the U.S. is fastly approaching. I can say for sure that it isn't because of tax liabilities that crypto went bear.

Taxes in the U.S. are due on April 17. It's only April 14, but we experienced a super bull run. And it's definitely not some kind of bull trap. It's a legit market reversal.

If we hit $9,000 before the 17th, then I'm calling it -- it's not taxes that caused everything to crash.

That said, I see that the news is reporting that everyone who bought crypto is now paying 25 million dollars in crypto taxes. that's a hell lot.

[jaysabi]

So I'm revisiting this thread as tax deadline in the U.S. is fastly approaching. I can say for sure that it isn't because of tax liabilities that crypto went bear.

Taxes in the U.S. are due on April 17. It's only April 14, but we experienced a super bull run. And it's definitely not some kind of bull trap. It's a legit market reversal.

If we hit $9,000 before the 17th, then I'm calling it -- it's not taxes that caused everything to crash.

That said, I see that the news is reporting that everyone who bought crypto is now paying 25 million dollars in crypto taxes. that's a hell lot.

I am dubious of Lee's claim as well, but your logic doesn't pan out. The last day to file is April 17, that doesn't mean everyone pays on April 17. People are paying taxes as they file which is all throughout February, March and April. The timing lines up with the deepest parts of the downtrend. (Also, I wouldn't call what has happened in the last week a "super bull run." More like a correction upward, a sudden jerk up that hasn't proven it will sustain or wasn't caused by one big buyer.) More importantly, if you were expecting the selling pressure to lift April 17, the only way to profit off it would be to get ahead of it, which means you have to start trading a couple weeks ahead of your predicted date. Everything you said only provides further anecdotal evidence for Lee's claim, which I still remain skeptical of because there's no hard evidence for it, only loose correlations.

[k_kuchkarov]

The fact that it will reach 25,000 before the end of the year is unequivocally true!
But for 2018, he must exceed more than $ 30,000!))

[Hydrogen]

According to a recent article on CNBC, Tom Lee is attributing the current price weakness to selling by American consumers and crypto exchanges to satisfy tax liabilities. At least this is an interesting theory, but keep in mind he's only speculating like everyone else.

Key (speculative) points from Lee:

• U.S. households likely owe $25 billion in capital gains taxes for their cryptocurrency holdings
• Additional selling pressure by crypto exchanges sitting on over a billion dollars in profit denominated in btc/eth and are converting to USD to satisfy tax obligations
• tax-related selling represents a massive outflow from crypto to USD and historical estimates are each $1 of USD outflow is $20-$25 impact on crypto market value
• Expects btc to find footing after April 17
• Expects btc to reach $20,000 by mid-year and $25,000 by year-end

Src: https://www.cnbc.com/2018/04/05/wall-streets-tom-lee-predicts-massive-outflow-from-cryptocurrencies-ahead-of-tax-day.html

He's got three essentially short term predictions that will be easy to track, which is the part I'm most interested in.

Bolded: that's an excellent theory to explain our last btc price decline. Merited.

There are likely many bitcoin HODL'ers who realized suddenly they needed to pay taxes on the $100,000 bitcoins they were holding. A btc selloff to cover last minute tax payments could easily be mirrored in btc's latest negative price trends. The surge in btc price prior to april 17th could also represent a buy-in phase, where investors are expecting the price to increase around the time the majority of tax payments are collected.

$25 billion dollars in capital gains taxes could be tantalizing enough for some states to support bitcoin legalization similar to how marijuana legalization has been supported in some states, possibly incentivized by the tax revenues states could bring in. Even if some countries initially ban bitcoin or crypto, if recession or economic stagnation sets in, the lure of increasing tax revenues via legalizing bitcoin could be too powerful a lure to be ignored, if bitcoins market cap continues to increase which could suggest even larger potential taxation.

It is also possible the $25 billion dollar figure is exaggerated.

[Loveboard]

So I'm revisiting this thread as tax deadline in the U.S. is fastly approaching. I can say for sure that it isn't because of tax liabilities that crypto went bear.

Taxes in the U.S. are due on April 17. It's only April 14, but we experienced a super bull run. And it's definitely not some kind of bull trap. It's a legit market reversal.

If we hit $9,000 before the 17th, then I'm calling it -- it's not taxes that caused everything to crash.

That said, I see that the news is reporting that everyone who bought crypto is now paying 25 million dollars in crypto taxes. that's a hell lot.

I am dubious of Lee's claim as well, but your logic doesn't pan out. The last day to file is April 17, that doesn't mean everyone pays on April 17. People are paying taxes as they file which is all throughout February, March and April. The timing lines up with the deepest parts of the downtrend. (Also, I wouldn't call what has happened in the last week a "super bull run." More like a correction upward, a sudden jerk up that hasn't proven it will sustain or wasn't caused by one big buyer.) More importantly, if you were expecting the selling pressure to lift April 17, the only way to profit off it would be to get ahead of it, which means you have to start trading a couple weeks ahead of your predicted date. Everything you said only provides further anecdotal evidence for Lee's claim, which I still remain skeptical of because there's no hard evidence for it, only loose correlations.

But people are paying up to April 17. I'm not saying that's when everyone pays at once, although perhaps some do. I believe that it's simply tomorrow when we'll really see how taxes affect crypto.

That said, my one friend traded $400 and made $20,000 or more by December, but the bear market took his "investment" value down to something below $10,000. He didn't pay/file crypto taxes because he said capital gains tax has a minimum threshold where if you don't meet it, then you don't have to report it (please don't take this sentence as legal advice).

If my friend's treatment of tax law is correct, then I believe that most people are in this boat. They made profit during the bull, but didn't cash out, and now the bear kicked their ass, so now they don't have to report because of the value of their coins dropping.

I do know that you're supposed to be taxed on every trade... so I'm not exactly sure how that fits into all this.

[fiulpro]

Well this is you know the theory that's been around since a couple of weeks and I do find that this might be true since in US you can go with retail , restaurants , real estates with the help of Bitcoins their influence is quite something that might make the price to go down.
If this is true then the price of Bitcoins will rise after the tax day and Continue to rise.
Also maybe people started encashing in advance so that they could invest that price in something else so that...the amount of tax that they would have to pay would have been less.
If that's so then everyone will be back in the market once the storm dies down .

[Ultegra134]

According to a recent article on CNBC, Tom Lee is attributing the current price weakness to selling by American consumers and crypto exchanges to satisfy tax liabilities. At least this is an interesting theory, but keep in mind he's only speculating like everyone else.

Key (speculative) points from Lee:

• U.S. households likely owe $25 billion in capital gains taxes for their cryptocurrency holdings
• Additional selling pressure by crypto exchanges sitting on over a billion dollars in profit denominated in btc/eth and are converting to USD to satisfy tax obligations
• tax-related selling represents a massive outflow from crypto to USD and historical estimates are each $1 of USD outflow is $20-$25 impact on crypto market value
• Expects btc to find footing after April 17
• Expects btc to reach $20,000 by mid-year and $25,000 by year-end

Src: https://www.cnbc.com/2018/04/05/wall-streets-tom-lee-predicts-massive-outflow-from-cryptocurrencies-ahead-of-tax-day.html

He's got three essentially short term predictions that will be easy to track, which is the part I'm most interested in.

I am not at the least bit surprised to be honest, there are a lot of rumors going on about trying to regulate cryptocurrencies for tax evasion purposes whatsoever. I recently posted a thread about a legislation which was proposed in the European Parliament in order to have more transparency within the transactions, to fight money laundering and terrorism financing purposes. You can check it out here https://bitcointalk.org/index.php?topic=3320925

It's not surprising that the governments want a cut from our transactions too, the trade volume is enormous every day, just imagine them having a small percent of that every day as taxes.

[jakagintiri]

According to a recent article on CNBC, Tom Lee is attributing the current price weakness to selling by American consumers and crypto exchanges to satisfy tax liabilities. At least this is an interesting theory, but keep in mind he's only speculating like everyone else.

Key (speculative) points from Lee:

• U.S. households likely owe $25 billion in capital gains taxes for their cryptocurrency holdings
• Additional selling pressure by crypto exchanges sitting on over a billion dollars in profit denominated in btc/eth and are converting to USD to satisfy tax obligations
• tax-related selling represents a massive outflow from crypto to USD and historical estimates are each $1 of USD outflow is $20-$25 impact on crypto market value
• Expects btc to find footing after April 17
• Expects btc to reach $20,000 by mid-year and $25,000 by year-end

Src: https://www.cnbc.com/2018/04/05/wall-streets-tom-lee-predicts-massive-outflow-from-cryptocurrencies-ahead-of-tax-day.html

He's got three essentially short term predictions that will be easy to track, which is the part I'm most interested in.

I am not at the least bit surprised to be honest, there are a lot of rumors going on about trying to regulate cryptocurrencies for tax evasion purposes whatsoever. I recently posted a thread about a legislation which was proposed in the European Parliament in order to have more transparency within the transactions, to fight money laundering and terrorism financing purposes. You can check it out here https://bitcointalk.org/index.php?topic=3320925

It's not surprising that the governments want a cut from our transactions too, the trade volume is enormous every day, just imagine them having a small percent of that every day as taxes.

Transparency is currently required for any transaction assessed on the number of crimes currently committed, to combat crime and this is very detrimental for all bitcoin lovers, especially for the reputation of bitcoin which is increasingly considered a criminal field, it must be fixed in order not endanger all users.
A lot of worry if taxes are applied to bitcoin, where every country has its own greed, if still within reasonable limits I think it's okay, but it will be a different story again if tax is applied, when it comes to venezuella it is very heavy because many highly professional corruptors.

[Hydrogen]

That said, my one friend traded $400 and made $20,000 or more by December, but the bear market took his "investment" value down to something below $10,000. He didn't pay/file crypto taxes because he said capital gains tax has a minimum threshold where if you don't meet it, then you don't have to report it (please don't take this sentence as legal advice).

I think the minimum for tax reporting in some US states is around $600 income/year. If someone profits $599 or less (whatever the minimum cutoff number is by individual state) they don't have to report their taxes. Otherwise I think they're required to file.

The $10,000 number is the amount some platforms like crypto exchanges or casinos are required to fill out a tax form for and forward to the US government(if my information is correct) although there are supposed to be secondary measures in effect to catch tax evaders who attempt to avoid the $10k number in reporting. An example of this occurs in casinos where people might win more than $10,000 and cash out their chips in increments smaller than $10k to avoid having their winnings be put on file.

Capital gains taxes are a touchy subject. I think with stocks capital gains taxes are not incurred until after the stock is sold. If a stock is held(HODL'ed) longer than 1 year a lesser tax percentage is paid than with stocks that are bought and sold within 12 months. Uncertain as to whether bitcoin or crypto currencies need to be exchanged for fiat in order to be taxed in a similar manner. That's a grey area for me and one I would be interested in seeing someone more knowledgeable comment on.