In the latest episode of The Market Report, Cointelegraph analyst Marcel Pechman delves into Bitcoin’s $26,685 latest bounce at $25,000, which some analysts and influencers argue represents a short-term buying opportunity. Pechman explains that Bitcoin’s inverse correlation with the U.S. Dollar Index has only held for 40% of the previous 20 months, meaning it is likely not a good metric to anticipate price movements.
The show then shifts focus to a recent Glassnode report revealing that the amount of BTC changing hands is at its lowest since October 2020, citing investors’ “apathy” and “exhaustion.” Pechman argues that bulls got tired after the United States Securities and Exchange Commission’s relentless action to pursue Coinbase and Binance. Ultimately, Pechman disagrees that Bitcoin’s recent movement to $25,000 presents an opportunity for buyers, given that the short-term risk-reward ratio near the current price level is around 50:50.
For the show’s next segment, Pechman analyzes the prediction made by Davis Hui, vice president of Bitcoin miner Canaan, that BTC will hit $100,000 in 2024 based on the halving and a spot exchange-traded fund (ETF) approval. First, Pechman explains that BlackRock’s $10 trillion in assets is merely a mirage, as 55% is stuck in fixed-income investments and $2.8 trillion is already invested in other ETFs such as commodities, the S&P 500 index, global emerging markets and alternative investments.
Furthermore, Pechman raises the risk of current holders deciding to flip their positions previously bought at $60,000, $50,000 or even $40,000 if Bitcoin’s price were to shoot up, meaning the offer side is never predictable regardless of miners’ incentives. Lastly, Pechman explains that a spot Bitcoin ETF has been a dream for the past eight years, and nothing has changed to refute the SEC’s reasons for dismissal, namely stablecoin trading volumes and unregulated offshore exchanges.
How to track and report crypto transactions for tax purposes
As cryptocurrencies and blockchain assets continue to grow in popularity and mainstream adoption, the United States Internal Revenue Service has taken an increasing interest in their taxation.
In the U.S., cryptocurrency is subject to crypto tax and is classified as transactions instead of property or assets. Needless to say, failure to accurately track and report these transactions can result in penalties and fines. Here is a comprehensive crypto tax guide for tracking and reporting crypto transactions for tax purposes in the United States.
How cryptocurrency is taxed in the U.S.
In the U.S., if you invest in crypto assets, such as nonfungible tokens (NFTs), and transact further for gains, you must be ready for crypto taxation. Note that buying crypto alone — or its rise or fall in value while it is in your portfolio — isn’t taxable. Taxes are due when you sell, invest or dispose of the asset in any way for gains.
Cryptocurrency is subject to taxation in two ways: capital gains tax and income tax. Insurance, Loans, Mortgage, Attorney, Lawyer, Donate, Degree, Hosting, Claim, Conference Call, Trading, Software, Recovery, Transfer, Gas/Electicity, Classes, Rehab, Treatment, Cord Blood
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Capital gains tax
This applies to profits earned from the sale of an asset that was purchased at a lower price. Any gains realized from selling or trading a digital asset for a higher price than purchased are subject to capital gains tax.
If crypto assets were held for less than a year, it is considered a short-term gain. If it was held for more than a year, it is regarded as a long-term gain.
Capital gains events include selling cryptocurrency for fiat currency and sending cryptocurrency (over $15,000) as a gift.
Additionally, purchasing goods and services with cryptocurrency is also considered a capital gains taxable event. Trading or swapping one digital asset for another is also considered a capital gains event. This includes purchasing NFTs with cryptocurrency.
As such, it is crucial to accurately track all crypto transactions for tax purposes. That said, declaring your capital losses can offset capital gains tax.
Income tax
Income tax on cryptocurrency transactions applies to earnings from the mining and staking of tokens. These include receiving cryptocurrency from an airdrop or any crypto interest earnings from decentralized finance (DeFi) lending.
Also, receiving cryptocurrency as a means of payment for labor is also considered an income tax event.
Long-term cryptocurrency tax rates
The IRS’ long-term cryptocurrency tax rates will apply to gains on cryptocurrencies that have been held for over a year.
For single individuals, no tax would be levied on crypto gains of up to $44,625. For individuals filing as heads of household or married people filing jointly, the rates range from 0% to 20% based on income tax brackets.