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Top stablecoins shed $7B in May as traders redeem tokens en masse

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Re: Top stablecoins shed $7B in May as traders redeem tokens en masse

#281

Post by jallen_dot_dev »

grey-area wrote: post #140
delusional wrote: post #134

Earlier quoted context omitted.

> Why would anyone buy Tether at this point? There's zero upside potential, after all. Tether, and "stablecoins" in general are known as the casino chips of Crypto. A way to exchange more volatile crypto for what is supposed to be essentially dollars without creating a taxable event. Assuming crypto is still something people want to trade, that's still a valuable service. Tether isn't supposed to be an investment. It…

Technically, isn’t selling one asset and buying another precisely the definition of a taxable event? I don’t see how tether helps you avoid taxes unless you’re going to lie about your transactions and hope nobody notices.

I think a lot of Americans are in for a surprise when they finally report their gains, the IRS audits them and does a little digging ("You reported a sale of USDT, where did the USDT come from? You say you traded BTC for it? You never reported a sale of BTC."), and they find out they have owed taxes on trades for years, plus penalties and interest.

Re: Top stablecoins shed $7B in May as traders redeem tokens en masse

#282

Post by tzs »

grey-area wrote: post #140
delusional wrote: post #134

Earlier quoted context omitted.

> Why would anyone buy Tether at this point? There's zero upside potential, after all. Tether, and "stablecoins" in general are known as the casino chips of Crypto. A way to exchange more volatile crypto for what is supposed to be essentially dollars without creating a taxable event. Assuming crypto is still something people want to trade, that's still a valuable service. Tether isn't supposed to be an investment. It…

Technically, isn’t selling one asset and buying another precisely the definition of a taxable event? I don’t see how tether helps you avoid taxes unless you’re going to lie about your transactions and hope nobody notices.

If you sell something for actual money, and use that actual money to buy something else, that sale would usually be a taxable event (well, it would be a realization event which may or may not be a taxable event, but in casual conversation just saying "taxable event" is fine).

If actual money is not involved, for example I trade my X with you for your Y, then it gets quite interesting. In the US there are generally two ways that tax law handles this. I don't know how far along the law is with fitting all the various cryptocurrency things into this.

One way is to treat it for tax purposes as if I sold X at its fair market value and you sold Y at its fair market value, and then I bought Y and you bought X. I'm taxes on my gains from that imputed sale, and take that price as my basis in Y. Similar for you.

The other way to treat it is as a non-realization event, putting off any tax consequences until I actually sell Y or trade it for something that gets handled as an imputed sale. My basis in Y is the same as the basis I had in X.

What determines which of these applies is whether or not the exchange is a "like-kind exchange". If the exchange is a like-kind exchange it gets the "swap basis" approach. If it is not like-kind it gets the "imputed sale" approach.

Sometimes this is clear cut. Suppose I bought an old guitar at garage sale 50 years ago for a couple dollars that is nowadays a valuable vintage guitar worth $100k, and 50 years ago you bought a new comic book that is now worth $100k to collectors.

If we trade, that would be an imputed sale because guitars and comic books are not like-kind.

When things are in the same category it gets much harder, and the case law is full of courts having to go deeply into philosophical questions of what makes things like-kind.

Say we trade paintings. Are all paintings like-kind? Or would a Monet not be like-kind with a Picasso because they are different artists and/or different styles? Is a male horse like kind with a female horse? Is an electric guitar like kind with an acoustic guitar? Is a comic book that is valuable because of the first appearance of a character like-kind with a comic book that is valuable because of who inked it?

Re: Top stablecoins shed $7B in May as traders redeem tokens en masse

#283

Post by [deleted] »

eru wrote: post #240
dalbasal wrote: post #85

Earlier quoted context omitted.

Either way, unless they are fully backed by USD... stablecoin is just an unregulated bank and it can run. If that's not the case, they have as much rope as they have ability to liquidate. IE they can keep buying their own coin to defend the price for as long as they can. Imo, stablecoins are a good example of everyone knowing the score but systemic risk accrues regardless. Stabkecoins just the worst kind of risk. Low…

Properly unregulated banks are actually less likely to experience runs. Backing by USD is not required. As you say, anything they can liquidate is good. Doesn't have to be USD. This works best when you are over-capitalised, ie when you have a thick equity cushion, so that when your assets go down in terms of USD, you still have enough balance sheet assets left to cover all your USD obligations. You are right that try…

[deleted]

Re: Top stablecoins shed $7B in May as traders redeem tokens en masse

#284

Post by krzyk »

lottin wrote: post #164
krzyk wrote: post #58

Earlier quoted context omitted.

You mean taxable for US tax office? In my country it is not taxable, only exchange to fiat currency is. (and this is explicitly mentioned).

If this is true, it simply means your tax code has a giant loophole that allows people avoid paying tax on capital gains by simply swapping an asset for another.

Why? You eventually have to pay it when you cash out (or buy service, goods with crypto).

If you wait you loose tax returns for the amount you invested in crypto (with each year you have it halved). Basically this is the same as in case of stock market. You don't pay taxes until you sell stock. And here stock is whole crypto market.

Re: Top stablecoins shed $7B in May as traders redeem tokens en masse

#285

Post by amluto »

lupire wrote: post #231
grey-area wrote: post #140

Earlier quoted context omitted.

Technically, isn’t selling one asset and buying another precisely the definition of a taxable event? I don’t see how tether helps you avoid taxes unless you’re going to lie about your transactions and hope nobody notices.

You don't report income on every item you shuffle. In the spirit of US law (since crypto is t precisely classified), if you are a professional trader, you only pay taxes on your overall annual trading profits, not each individual trade. Same as how a a retail store doesn't have gains and losses on every individual item in inventory.

I am not a tax expert, but you should read this:

https://www.irs.gov/taxtopics/tc429

If you use one of the various mark-to-market rules, then you may well “only pay taxes on your overall annual trading profits”, but you pay it every year on unrealized gains too. Choose your poison.

Re: Top stablecoins shed $7B in May as traders redeem tokens en masse

#286

Post by TekMol »

xmcqdpt2 wrote: post #229
TekMol wrote: post #137

Earlier quoted context omitted.

Which exchange pays you those 5-7% and why do they do that?

There is even better rates available. The Anchor protocol pays 20% APR! And the principal is protected as described in the white paper, > Anchor offers a principal-protected stablecoin savings product that pays depositors a stable interest rate. It achieves this by stabilizing the deposit interest rate with block rewards accruing to assets that are used to borrow stablecoins. source: https://www.anchorprotocol.com/do…

Is this satire? I'm 50/50 about it.

Re: Top stablecoins shed $7B in May as traders redeem tokens en masse

#287

Post by unityByFreedom »

cormacrelf wrote: post #120
unityByFreedom wrote: post #100

Earlier quoted context omitted.

> This is how you get a 2008-type crash - loans which seem to be unrelated but are tied to a common market. How does this happen again 15 years later? Is it because we ineffectively dealt with 2008? A result of the repeal of Glass-Steagall? Or have we over regulated banking to the point the miscreants went underground to build things like crypto? I don't get it. Crashing over and over doesn't seem good for anyone.

The powers that be aren't trying to crash it all on purpose, nobody wants another 2008. They have produced a pretty hands-off response, because of a number of factors. Crypto has an explicit project to escape US regulation, so lots of money is in e.g. the Bahamas and difficult to target. Many companies are trying really hard to avoid even having US customers, so that's a hands-off win for regulation as the feds have…

> So far there hasn't been a 2008-scale meltdown because it hasn't been a big enough market to have a domino effect

Isn't it more that the crypto + companies with cult followings + chinese real estate bubbles simply have not yet popped? These assets are big enough to cause a sell-off in other areas. Maybe they haven't dipped low enough yet, or maybe the dips are gradual enough to be absorbed.

Re: Top stablecoins shed $7B in May as traders redeem tokens en masse

#288

Post by unityByFreedom »

marvin wrote: post #274
unityByFreedom wrote: post #100

Earlier quoted context omitted.

> This is how you get a 2008-type crash - loans which seem to be unrelated but are tied to a common market. How does this happen again 15 years later? Is it because we ineffectively dealt with 2008? A result of the repeal of Glass-Steagall? Or have we over regulated banking to the point the miscreants went underground to build things like crypto? I don't get it. Crashing over and over doesn't seem good for anyone.

> How does this happen again 15 years later? It's human nature to create and participate in systems that are untenable over time but are tempting for short-term speculation. Normally, in advanced economies, we try to use regulation to prevent or limit these events. But crypto explicitly avoids regulation, so of course it's going to pop up there. It's got nothing to do with not cleaning up after 2008. Cryptocurrency i…

> Normally, in advanced economies, we try to use regulation to prevent or limit these events. But crypto explicitly avoids regulation, so of course it's going to pop up there. It's got nothing to do with not cleaning up after 2008.

The point I wanted to make is when you regulate too much you may encourage the growth of things that are unregulatable. Gambling and alcohol come to mind. I don't know that that's what happened, hence the question. Phrasing it another way, are we post-WW I (over regulated) or post-WW II (got it right, but you'll never be perfect)?

Re: Top stablecoins shed $7B in May as traders redeem tokens en masse

#289

Post by samatman »

TekMol wrote: post #11

What are people holding all those stable coins for? In contrast to other crypto currencies, nobody is holding it for speculation. I doubt anybody expects stable coins to be a better store of "dollar value" than the dollar itself. Yet, someone holds those $150B worth of stable coins. Who and why?

They combine one strength of sovereign currencies (stable unit of account and store of value) with some strengths of cryptocurrencies, chiefly self-custody.

If someone is invested in e.g. Bitcoin and thinks they can sell the peak, turning it into $stablecoin is the easiest way, and the only compelling reason to then move that value into sovereign currencies is: you want to spend it, or there's reason to hedge on the stability of the peg. If you're planning to re-enter the market later, (actually stable) stablecoins are just as good, and are what a lot of these traders will have when they sell, so why do two additional transactions, even if they don't trigger taxable events, which they would.

I don't own stablecoins.

Re: Top stablecoins shed $7B in May as traders redeem tokens en masse

#290

Post by unityByFreedom »

LatteLazy wrote: post #103
unityByFreedom wrote: post #100

Earlier quoted context omitted.

> This is how you get a 2008-type crash - loans which seem to be unrelated but are tied to a common market. How does this happen again 15 years later? Is it because we ineffectively dealt with 2008? A result of the repeal of Glass-Steagall? Or have we over regulated banking to the point the miscreants went underground to build things like crypto? I don't get it. Crashing over and over doesn't seem good for anyone.

In this case the damage will be limited to a bunch crypto companies. The issue before was it hit companies we relied on for things like mortgages and current accounts. Crypto companies can just be allowed to fail and no one except their users will be effected. Hence they are not regulated. So even keeping GS (which was limited to big banks and a few similar institutions) wouldn't have made any difference. Not that ke…

> In this case the damage will be limited to a bunch crypto companies. The issue before was it hit companies we relied on for things like mortgages and current accounts. Crypto companies can just be allowed to fail and no one except their users will be effected.

I don't buy the argument that crypto lives in a vacuum. People valuing that asset are part of the global economy.

The question is, is crypto really as valuable as the crypto exchange markets claim, and do companies assign face value to these assets, or do they account for the amount of risk they deserve?

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