Bitcoin is still early

[Panscan]

I personally find the energy criticisms as very weak. A ton of the things we do use a ton of energy and no one cares. It would be really good for the planet if every suburban mom with 2 kids didn't want an extended tahoe because " they feel safer" or " like sitting up high," yet huge SUVs continue to sell. It would be good for the planet if everyone didn't fly around in private jets. It would be good for the planet if we had many more nuclear power plants, yet we don't due to fear.

I think it's more likely prices were getting nuts and any little criticism was going to start a cascade. I don't think people actually care about the energy consumption, it's just used to tarnish crypto.

[Panscan]

Sweden is a microscopic country, there are almost 10 US states bigger than their entire country. They have a GDP of 530 billion. It's not really alarming to me that bitcoin uses more energy than a tiny european nation.

[Max Power]

Store of Value has a literal financial definition, no big deal we should just continue making stuff up...

Good stuff... pretty much sums up the whole thing right there.
Bitcoin failed as a currency, failed as an "investment" (except for a select few in pre-2015), and it doesn't work as value store since its valuation and supply are erratic. The only way to make money on it is greater fool theory and talking others into buying, and I'm honestly amaaaaazed it has even lasted this long. It will go down as one of the biggest jokes of financials in the long term... up there with Fannie/Freddie, toilet paper IPOs of the dot com boom, etc.

I seriously wonder how many things, products, ideas, services, etc have been pictured as golden, compared to gold, gold plated, etc. Every other financial firm uses golden signage. I'm sure it's in the millions... in the modern USA alone. Every time I see any crypto pictured, it's always shown as silver or gold. Hmmm.

...Or you can choose to not play and ignore it completely and still do well.

Awesome. Many thanks. Consider your permission accepted. I will avoid it.

...I don't have extra cash to buy the dip right now, but I think it's a great time for anyone who wants to invest in crypto to start dollar cost averaging...

I thought dollar cost averaging was for things that have profits, utility, potential, etc. "Fundamentals," if you will.

Why don't you have extra cash?

...Im unsure about cryptos future in general...

Crypto's future? That's easy... the future is the same as the past:
You buy it, you go on forums and FB, you talk it up, blog about it, you tell people it's the next big thing, tell them all that you made money on it. Buy crypto instead of paying your loans, then take out more loans if you can and buy more. Tell people at work, the gym, anywhere... tell them to buy before it spikes again. Google "greater fool theory" for ideas on other hype-em-up techniques.

It's kinda like Tesla stock. Earnings, functionality, logic, etc don't matter like they do for "real investments." You just buy it, pump it, and get out before a crash. Whoops, forgot to tell ya that a lot of big funds are better at that game than you.

[NapoleanDynamite]

To explain it in a way that I understand it, the Bitcoin blockchain is a big transaction ledger of all Bitcoin currency transactions and exchanges.

Every time a Bitcoin moves it’s verified by all the computers “mining”. All the computers use a lot of electricity and computing power the verify a group of transactions.

The first computer (or group) that verifies the right ledger/puzzle gets rewarded Bitcoin by the algorithm. The others get nothing.

So yes, there’s a lot of electricity being used across the world for this purpose.

Since it uses a lot of electricity, the big miners go to where electricity is the cheapest. Some say that they go to places with a lot of renewable energy so that it’s cheap. Some say it’s big coal mines in China.

They also say that overall it uses less energy than the traditional banking system because how much energy did it take to build all the banks, power all the banks, the people working in the banks, upkeep/renovate banks, servers, etc.

So who knows 🤷♂️ who to believe.

There is some information in this that is technically incorrect. Just gonna try and go over it a little. "Mining" is what uses a significant amount of energy. However, every time a bitcoin moves it does not require a "miner". It only requires multiple "nodes" verifying the transaction. Nodes are run very inexpensively and consume very little energy.

Mining however is the process by which new coins are minted/mined. To do this, very complex mathematical calculations have to be completed. These can only be done by expending significant amount of computing power.

So it is true that a significant amount of energy is used to mine bitcoins. However, whether this is a worthwhile endeavor...and how much if it is already "green" is a different story. Below is an article that is actually fairly well balanced on both sides of the argument if you want a quick review:

https://nymag.com/intelligencer/2021/05/jack-dorsey-says-bitcoin-is-climate-friendly-is-he-right.html

[NapoleanDynamite]

I did this a few days ago, did a wash sale buyback to lock in some capital losses to offset some capital gains from earlier this year.

As for TLH....I'm not convinced the IRS won't change this and backdate the changes to January 2021. But there is a possibility one could simply sell and re-buy if you have losing investments at this point. I haven't done it yet, although have considered it. Most of my buys would still be gains, but I do have some of my DCA buys that are over 40K and a couple big buys that were over 40K. Anyone else want to comment on TLH-ing? I definitely don't trust CNBC with my accounting practices, but the article does bring it up again.

https://www.cnbc.com/2021/05/25/bitcoin-crash-opens-door-to-a-tax-loophole-for-investors.html

[CordMcNally]

As for TLH....I'm not convinced the IRS won't change this and backdate the changes to January 2021. But there is a possibility one could simply sell and re-buy if you have losing investments at this point. I haven't done it yet, although have considered it. Most of my buys would still be gains, but I do have some of my DCA buys that are over 40K and a couple big buys that were over 40K. Anyone else want to comment on TLH-ing? I definitely don't trust CNBC with my accounting practices, but the article does bring it up again.

https://www.cnbc.com/2021/05/25/bitcoin-crash-opens-door-to-a-tax-loophole-for-investors.html

I would be very surprised if they back date something like this. I do think this will be changed at some point in the near future.

[Brains428]

With cap gains or losses- how does one know which portion of BTC they're selling. Is it FIFO or LIFO? Can this be established on the front end? What if one is dealing with non-US exchanges?

Tax payers as well as the IRS will have their hands full.

[Panscan]

With cap gains or losses- how does one know which portion of BTC they're selling. Is it FIFO or LIFO? Can this be established on the front end? What if one is dealing with non-US exchanges?

Tax payers as well as the IRS will have their hands full.

its going to be a complete nightmare.

[NapoleanDynamite]

its going to be a complete nightmare.

So far this is all based on a spread sheet that the individual (you) have to keep.

The way I foresee this as an example...Purely hypothetical here...

Person X buys 2 bitcoins at $4,000, 2 bitcoins at $5,000, 2 bitcoins at $6,000 and a bunch more on the way up. Then they buy 1 bitcoin at $50,000 and a bunch of partial bitcoins between 4K and 64K. Then the price of bitcoin falls to 35K. One could theoretically choose to sell the 1 bitcoin they bought at 50K and the whole lot of partial bitcoins between 35K and 64K. Let's say this total is 2.5 bitcoins. So they then sell those 2.5 bitcoins as 35K and then 60 minutes later buy them back at $35,0001. That person could theoretically take the full loss on those 2.5 bitcoins and re-establish their basis at $35,001 and own the exact same number of bitcoins. This could easily be a 30K loss for TLH. It would be a great thing for any high net worth individual.

This is purely a loophole for tax avoidance, and I see no way the IRS doesn't fix this issue. But it will be difficult to fix it due to the way people transact in bitcoin. Not to mention every other cryptocurrency out there. Not to mention the IRS is a government entity that works on govt time (the pace of a turtle).

I'm not sure FIFO or LIFO applies here since it is not the exchanges that are keeping track. No matter what happens, it is an interesting value proposition the way thing stand right now.

[Brains428]

So far this is all based on a spread sheet that the individual (you) have to keep.

The way I foresee this as an example...Purely hypothetical here...

Person X buys 2 bitcoins at $4,000, 2 bitcoins at $5,000, 2 bitcoins at $6,000 and a bunch more on the way up. Then they buy 1 bitcoin at $50,000 and a bunch of partial bitcoins between 4K and 64K. Then the price of bitcoin falls to 35K. One could theoretically choose to sell the 1 bitcoin they bought at 50K and the whole lot of partial bitcoins between 35K and 64K. Let's say this total is 2.5 bitcoins. So they then sell those 2.5 bitcoins as 35K and then 60 minutes later buy them back at $35,0001. That person could theoretically take the full loss on those 2.5 bitcoins and re-establish their basis at $35,001 and own the exact same number of bitcoins. This could easily be a 30K loss for TLH. It would be a great thing for any high net worth individual.

This is purely a loophole for tax avoidance, and I see no way the IRS doesn't fix this issue. But it will be difficult to fix it due to the way people transact in bitcoin. Not to mention every other cryptocurrency out there. Not to mention the IRS is a government entity that works on govt time (the pace of a turtle).

I'm not sure FIFO or LIFO applies here since it is not the exchanges that are keeping track. No matter what happens, it is an interesting value proposition the way thing stand right now.

At this point, it almost seems like there should be some sort of safe harbor, but with a larger margin of error- like 30%. The hard thing is that until there is a reliable means of tracking all coins across all exchanges, the bright line to be established as truth is also hazy.

However, people who use trading services like wealthfront commonly have pages of transactions of small trades that are not combed through.

So, does the IRS then decide to audit a random 10% of people who hold crypto, or do they choose 10% of people with transactions above x number?

I have many questions, but few answers. I'm not sure if it would be best to be early into tax courts when there is no precedent, or be the guinea pig for which the precedent is set.

[CordMcNally]

At this point, it almost seems like there should be some sort of safe harbor, but with a larger margin of error- like 30%. The hard thing is that until there is a reliable means of tracking all coins across all exchanges, the bright line to be established as truth is also hazy.

However, people who use trading services like wealthfront commonly have pages of transactions of small trades that are not combed through.

So, does the IRS then decide to audit a random 10% of people who hold crypto, or do they choose 10% of people with transactions above x number?

I have many questions, but few answers. I'm not sure if it would be best to be early into tax courts when there is no precedent, or be the guinea pig for which the precedent is set.

I imagine those who have big purchases and those who report large losses would be the first to be scrutinized.

[NapoleanDynamite]

Your example is really hard to follow, but my understanding of the guidance tax professionals are giving on this matter (and the way most bitcoin tax softwares work in calculating this, based on my experience using multiple different ones) is that you can pick from FIFO vs LIFO etc but you have to be consistent with it and can't pick and choose when to use one or the other.

I agree that my example is very hard to follow. And the tax professionals and software programs don't have the true answer yet. Until the IRS definitively publishes a statement on this, I don't think anyone can give a definitive answer.

My example is using FIFO vs LIFO vs HIFO. Read the below article to understand what I am discussing. I have read publication's 544 and 550 from the IRS and I have yet to find a definitive answer to the questions we are asking. No matter what the answer is here, good tracking is absolutely necessary to use any of these methods.

https://www.forbes.com/sites/shehanc...h=7c3fd34536aa

[G]

I keep checking here to read about all the chest thumping on the tax-loss harvesting and dollar-cost averaging.

I am finding that GBTC in my brokerage account makes these easy.

[Lordosis]

How do you tax loss harvest Bitcoin? If you sell for a loss what do you buy?

[abds]

How do you tax loss harvest Bitcoin? If you sell for a loss what do you buy?

You buy Bitcoin again.