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If Bitcoin Looks Like It Isn’t Trading, It’s Because It Isn’t

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Re: If Bitcoin Looks Like It Isn’t Trading, It’s Because It Isn’t

#51

Post by paulddraper »

cwkoss wrote: post #44
paulddraper wrote: post #33

Earlier quoted context omitted.

Once transaction fees exceeded $20 back in 2017, it was pretty clear Bitcoin was an asset not a currency. Horrible properties for a currency. Usual properties for a collectible asset.

I'd argue that IRS tax treatment of Bitcoin as an asset (and thus making every currency-like purchase - even when exchanging for good or services - a taxable event) is another significant factor. Fees may have made this inevitable, but having to deal with taxes has definitely made me much more wary of using it for small purchases. Bitcoin tax accounting is tedious, and I think once a company solves non-custodial reco…

The IRS treats essentially everything ownable as an asset: gold, paper currency, bitcoin, art, postage stamps.

You obviously never pay capital gains tax on USD, because it never changes value relative to USD.

AFAIK a Bitcoin is no different than a Euro tax-wise.

Re: If Bitcoin Looks Like It Isn’t Trading, It’s Because It Isn’t

#52

Post by paulddraper »

hndamien wrote: post #45
paulddraper wrote: post #35

Earlier quoted context omitted.

Well, physical Bitcoins aren't being traded either. Because there aren't physical Bitcoins.

Actual custody is being traded though.

Same for gold (again legally, not physically).

Re: If Bitcoin Looks Like It Isn’t Trading, It’s Because It Isn’t

#53

Post by cwkoss »

paulddraper wrote: post #51
cwkoss wrote: post #44

Earlier quoted context omitted.

I'd argue that IRS tax treatment of Bitcoin as an asset (and thus making every currency-like purchase - even when exchanging for good or services - a taxable event) is another significant factor. Fees may have made this inevitable, but having to deal with taxes has definitely made me much more wary of using it for small purchases. Bitcoin tax accounting is tedious, and I think once a company solves non-custodial reco…

The IRS treats essentially everything ownable as an asset: gold, paper currency, bitcoin, art, postage stamps. You obviously never pay capital gains tax on USD, because it never changes value relative to USD. AFAIK a Bitcoin is no different than a Euro tax-wise.

I am not an accountant and may be wrong, but if a US citizen exchanges $1000 USD to euro, and then euro appreciates 10%, and then they spend that euro to make a purchase, I was under the impression that that purchase is not subject to capital gains. Exchanging back to USD would be, but I thought currency classification exempted cap gains on purchases of goods and services.

Am I wrong? Have never held any significant amount of foreign currency, so have never dealt with this personally.

Re: If Bitcoin Looks Like It Isn’t Trading, It’s Because It Isn’t

#54

Post by paulddraper »

cwkoss wrote: post #53
paulddraper wrote: post #51

Earlier quoted context omitted.

The IRS treats essentially everything ownable as an asset: gold, paper currency, bitcoin, art, postage stamps. You obviously never pay capital gains tax on USD, because it never changes value relative to USD. AFAIK a Bitcoin is no different than a Euro tax-wise.

I am not an accountant and may be wrong, but if a US citizen exchanges $1000 USD to euro, and then euro appreciates 10%, and then they spend that euro to make a purchase, I was under the impression that that purchase is not subject to capital gains. Exchanging back to USD would be, but I thought currency classification exempted cap gains on purchases of goods and services. Am I wrong? Have never held any significant…

My understanding is that a gain or loss in that currency is recognized upon spending/trading it.

Quick search brought me to https://thismatter.com/money/tax/foreign-currency-transactio... which agrees with that.

Like use tax, I suspect it is often just neglected.

Re: If Bitcoin Looks Like It Isn’t Trading, It’s Because It Isn’t

#55

Post by bduerst »

aazaa wrote: post #18

> About 9.1 million bitcoins, representing about 51% of those outstanding, haven’t changed hands in at least six months, according to Flipside. About two million of those bitcoin haven’t moved in more than two years. Transaction volume has always been a difficult metric. For one thing, most transactions are likely to happen off-chain. That can occur in a centralized system like Coinbase. This has always been a possib…

Lightning network comes up just about every discussion involving bitcoin transactions, but because it requires the bitcoin network to make confirmations, Lightning only scales with the number of transactions, not users. This is still a problem.

Example of the problem:

* For 2 users to make 10,000,000 transactions between each other, it would take 10 minutes on the lightning network.

* For 10,000,000 users to make just 2 transactions between each other, it would take 46 days on the lightning network.

This means that if the entire state of Georgia used Lightning Network as a payment system, people wouldn't even be able to pay their monthly rent on time. Lightning Network is an over-engineered solution to a Bitcoin problem, which is why nobody is seriously adopting it.

Re: If Bitcoin Looks Like It Isn’t Trading, It’s Because It Isn’t

#56

Post by pouta »

bduerst wrote: post #55
aazaa wrote: post #18

> About 9.1 million bitcoins, representing about 51% of those outstanding, haven’t changed hands in at least six months, according to Flipside. About two million of those bitcoin haven’t moved in more than two years. Transaction volume has always been a difficult metric. For one thing, most transactions are likely to happen off-chain. That can occur in a centralized system like Coinbase. This has always been a possib…

Lightning network comes up just about every discussion involving bitcoin transactions, but because it requires the bitcoin network to make confirmations, Lightning only scales with the number of transactions, not users. This is still a problem. Example of the problem: * For 2 users to make 10,000,000 transactions between each other, it would take 10 minutes on the lightning network. * For 10,000,000 users to make jus…

Where can I read more about how you came up with those numbers? I didn't knew that side of lightning.

Re: If Bitcoin Looks Like It Isn’t Trading, It’s Because It Isn’t

#57

Post by bduerst »

rwmj wrote: post #15
scrooched_moose wrote: post #8

Earlier quoted context omitted.

Because Bitcoin is (at least theoretically) a currency. You're comparing it to a commodity or store of value. The power of a currency is the ability to trade it for goods and services. If that is no longer happening with Bitcoin it has morphed into something else entirely.

I've never owned or traded bitcoin, but as I understand it the main attraction is that it's like the gold standard (of course for people who don't understand why the gold standard was a bad idea).

Bitcoin attracts three different niche markets:

- Crypto enthusiasts who are infatuated with the technology or the math involved

- Anti-Fed Libertarian types who want to use something that isn't controlled by a government

- HFTs and speculators who either use it in part of their models or as a pump and dump vehicle

Some people also use it to buy illegal stuff, but most of them have moved onto Monero as the primary privacy-based cryptocurrency.

Re: If Bitcoin Looks Like It Isn’t Trading, It’s Because It Isn’t

#59

Post by cwkoss »

paulddraper wrote: post #54
cwkoss wrote: post #53

Earlier quoted context omitted.

I am not an accountant and may be wrong, but if a US citizen exchanges $1000 USD to euro, and then euro appreciates 10%, and then they spend that euro to make a purchase, I was under the impression that that purchase is not subject to capital gains. Exchanging back to USD would be, but I thought currency classification exempted cap gains on purchases of goods and services. Am I wrong? Have never held any significant…

My understanding is that a gain or loss in that currency is recognized upon spending/trading it. Quick search brought me to https://thismatter.com/money/tax/foreign-currency-transactio... which agrees with that. Like use tax, I suspect it is often just neglected.

Interesting, thanks for correcting me.

It looks like there may be an exemption for small amounts under $200 (https://smallbusiness.chron.com/foreign-currency-exchange-ta...), which would make Bitcoin much more functional (if it would apply to Bitcoin anyways, mute point as BTC is classified as an asset), but not to the extent of my misconception.

Re: If Bitcoin Looks Like It Isn’t Trading, It’s Because It Isn’t

#60

Post by mikeyouse »

account73466 wrote: post #48
mikeyouse wrote: post #38

Earlier quoted context omitted.

There's no such thing as a "market cap" for Bitcoin - seriously, give me a definition of "market cap" for Bitcoin that makes any sense at all compared to something like the future value of cash flows from UNH equity.

Not my definition but the accepted one is price times number of bitcoins mined so far. Of course by selling 1% of all bitcoins you would clean all order books. However, George Soros used only a few billions to bet against the British pound.

Which is nonsense since so many bitcoins have been lost and there is no underlying asset that owning a bitcoin grants you access to.
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