Tag Archives: Crypto

U.S. tax liabilities for crypto currencies in 2017 seen at $25 billion, to pressure bitcoin: Fundstrat
April 5, 2018 6:02 pm|Comments (0)

NEW YORK (Reuters) – Soaring crypto-currency prices last year are estimated to result in U.S. tax liabilities of $ 25 billion, adding further selling pressure to these assets in the short term, according to a research note by Fundstrat Global Advisers on Thursday.

A bitcoin logo is seen at a facility of the Youth and Sports Ministry in Caracas, Venezuela February 23, 2018. REUTERS/Marco Bello

This could mean a massive outflow from crypto currencies to the dollar by April 15, the deadline for filing taxes this year, the firm said.

“We believe selling pressures (in crypto) have been amplified by capital gains tax-related selling this year,” said Thomas Lee, Fundstrat’s co-founder and head of research. Lee was formerly J.P. Morgan’s chief equity strategist from 2007 to 2014.

Still, Fundstrat believes the outlook for bitcoin should improve after the April 15 tax deadline. It reiterated its mid-year target of $ 20,000 and year-end forecast of $ 25,000.

Bitcoin in 2018 has lost more than 50 percent of its value, with other crypto currencies such as ether and ripple also hurt by intense regulatory scrutiny around the world.

Bitcoin last traded down nearly 2 percent at $ 6,673.53 on the Bitstamp platform. In December last year, bitcoin hit a record just shy of $ 20,000.

Virtual currencies led by bitcoin grew $ 590 billion in 2017 in terms of market value, compared with an $ 11 billion increase in 2016, Fundstrat said, estimating that 30 percent of crypto holders are in the United States.

The $ 25-billion tax liability accounts for 20 percent of the expected total tax payments for capital gains of around $ 168 billion in 2017, the research firm said. The projected tax liability is based on taxable gains for crypto of $ 92 billion, it added.

Fundstrat also said crypto exchanges posted record profit in November and December and are expected to have huge tax liabilities, which should add to further selling in crypto-currencies. Many of the exchanges have net income exceeding $ 1 billion in 2017 and keep their working capital in bitcoin and ether, the research firm added.

To meet these tax liabilities, exchanges need to sell bitcoin and ether.

Reporting by Gertrude Chavez-Dreyfuss; Editing by Bernadette Baum

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Rookie crypto investors look past risks, flock to London show
March 12, 2018 6:01 pm|Comments (0)

LONDON (Reuters) – Dozens of stallholders, pitching anything from a happy retirement to commercial property to the future of electronics, set up shop in central London last weekend to pitch their wares.

Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, February 14, 2018. REUTERS/Dado Ruvic/Illustration

The companies and their salesmen were not there to part ways with the actual product, however. They just wanted to encourage buying into the digital coin craze that is raising billions of dollars.

At what organizers claimed to be Britain’s first large-scale “Crypto Investor Show”, attendees were looking to get in on the next initial coin offering (ICO).

The talk of Silicon Valley, ICOs are a mostly unregulated funding mechanism for start-ups to raise capital by creating and then issuing their own virtual coins or tokens. Last year, they raised a record sum as interest in cryptocurrencies like bitcoin surged.

“I came here to learn about ICOs. You have to do your research, but I would invest, it’s the upcoming thing,” said 30-year-old Shahzad Anwar, who installs electric charging points and had traveled down from the central England town of Solihull with his brother to attend.

“To me, stocks and shares and bonds are over, they are done,” he said, as attendees listened to a pitch at a nearby stall for an ICO wanting to raise tens of millions of dollars to build and race a supercar. Another promised to build a network of rest homes for the elderly.

Regulators say ICOs are highly speculative and investors should be prepared to lose everything. Unlike stocks, most ICOs do not confer ownership rights in the underlying business, just the possibility that the tokens will be worth more in future.

Supporters say ICOs are revolutionizing the capital-raising industry, a crowdfunding alternative that gives ordinary people the chance to invest in start-ups, normally the preserve of the venture capitalist elite.

From circulating on tiny online chatrooms a few years ago, cryptocurrencies and ICOs have moved to the mainstream, with public advertising common.

Some companies have pushed back, however. Facebook said it would ban all crypto adverts because of the risks to investors. Twitter said it was taking measures to prevent cryptocurrency-related accounts from running scams on its platform.

GENERAL PUBLIC

London regularly hosts conferences on blockchain, the technology underpinning cryptocurrencies, where tech wizards exchange ideas, but the London show was geared towards the general public as well as experts.

The crowds arrived, some families for a day out, touring the stalls and listening to panelists. As well as marketing, there were sessions that discussed the risks.

Several attendees who worked in the industry said they were disappointed with the ICOs on offer, with staff hired for the day to hand out flyers and with little understanding of blockchain technology, or if it was even relevant to their idea.

“Don’t fall for some of the marketing out there … [You have to ask] is it actually solving a problem or is it just making one up?” said Linda Leaney at Globcoin, which claims to be a stable cryptocurrency backed by global currencies and gold.

One Leeds-based company, offering a token backed by commercial property, crypto trading and the founder’s online discount shopping platform, said it had raised $ 4 million in seed investment, and was targeting $ 10 million, with bonus tokens and referral awards for attendees that emailed their details.

Nearby, one programmer and salesman after another took to a small stage to explain their business. No company promised anyone a specific financial return, and aside from the price of each token and early-bird discounts, they stuck to talking up their product.

Sam Smit, a 34-year-old electronics engineer from Horsham in southern England, is a self-styled “dirty flipper” – someone who buys a token at the pre-ICO stage before token sales are opened to the general public, then sells them when they begin trading on an exchange.

“Have you seen `Wolf of Wall Street’? This is the same, pump and dump!” he said, referring to the 2013 film about the stock broker and convicted fraudster Jordan Belfort.

“People here are illiterate idiots. Often after the pre-ICO stage, it’s already too late to buy,” he said – while admitting that he had lost around $ 400,000 in January when cryptocurrency prices slumped.

Editing by Sujata Rao, Larry King

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Crypto 'noobs' learn to cope with wild swings in digital coins
February 26, 2018 6:00 am|Comments (0)

NEW YORK (Reuters) – After researching digital currencies for work last year, personal finance writer J.R. Duren hopped on his own crypto-rollercoaster.

Duren bought $ 5 worth of litecoin in November, and eventually purchased $ 400 more, mostly with his credit card. In just a few months, he experienced a rally, a crash and a recovery, with the adrenaline highs and lows that come along.

“At first, I was freaking out,” Duren said about watching his portfolio plunge 40 percent at one point. “The precipitous drop came as a shock.”

The 39-year-old Floridian is part of the new class of crypto-investors who do not necessarily think bitcoin will replace the U.S. dollar, or that blockchain will revolutionize modern finance or that dentists should have their own currency.

Dubbed by longtime crypto-investors as “the noobs”– online lingo for “newbies” – they are ordinary investors hopping onto the latest trend, often with little understanding of how cryptocurrencies work or why they exist.

“There has been a big shift in the type of investors we have seen in crypto over the past year,” said Angela Walch, a fellow at the UCL Centre for Blockchain Technologies. “It’s shifted from a small group of techies to average Joes. I overhear conversations about cryptocurrencies everywhere, in coffee shops and airports.”

Walch and other experts cited parallels to the late-1990s, when retail investors jumped into stocks like Pets.com, a short-lived online seller of pet supplies, only to watch their wealth evaporate when the dot-com bubble burst.

Bitcoin is the best-known virtual currency but there are now more than 1,500 to choose from, according to market data website CoinMarketCap, ranging from popular coins like ether and ripple to obscure coins like dentacoin, the one intended for dentists.

Exactly how many “noobs” bought into the craze last year is unclear because each transaction is pseudonymous, meaning it is linked to a unique digital address, and few exchanges collect or share detailed information about their users.

A variety of consumer-friendly websites have made investing much easier, and online forums are now filled with posts from ordinary retail investors who were rarely spotted on the cryptocurrency pages of social news hub Reddit before.

Reuters interviewed eight people who recently made their first foray into digital currency investing. Many were motivated by a fear of missing out on profits during what seemed like a never-ending rally last year.

One bitcoin was worth almost $ 20,000 in December, up around 1,900 percent from the start of 2017. As of Friday afternoon it was worth about $ 10,000 after having fallen as much as 70 percent from its peak. Other coins made even bigger gains and experienced equally dizzying drops over that time frame.

“There was that two-month period last year where all the virtual currencies kept going and up and I had a couple of friends that had invested and they had made five-figure returns,” said Michael Brown, a research analyst in New Jersey, who said he bought around $ 1,000 worth of ether in December.

“I got swept by the media frenzy,” he said. “You never hear stories of people losing money.”

In the weeks after Brown invested, his holdings soared as much as 75 percent and tumbled as much as 59 percent.

BUY AND “HODL”

Investors who got into bitcoin before its 2013 crash like to refer to themselves as “OGs,” short for “original gangsters.” They tend to shrug off the recent downturn, arguing that cryptocurrencies will be worth much more in the future.

“As crashes go, this is one of the biggest,” said Xavier Levenfiche, who first invested in cryptocurrencies in 2011. “But, in the grand scheme of things, it’s a hiccup on the road to greatness.”

Spooked by the sudden fall but not willing to book a loss, many investors are embracing a mantra known as “HODL.” The term stems from a misspelled post on an online forum during the cryptocurrency crash in 2013, when a user wrote he was “hodling” his bitcoin, instead of “holding.”

Mike Gnitecki, for instance, bought one bitcoin at around $ 18,000 in December and was sitting on a 43 percent decline as of Friday, waiting for a recovery.

“I view it as having been a fun side investment similar to a gamble,” said Gnitecki, a paramedic from Texas. “Clearly I lost some money on this particular gamble.”

Duren, the personal finance writer, is also holding onto his litecoin for now, though he regrets having spent $ 33 on credit card and exchange fees for a $ 405 investment.

Some retail investors who went big into cryptocurrencies for the first time during the rally last year remain positive.

Didi Taihuttu announced in October that he and his family had sold everything they owned — including their business, home, cars and toys — to move to a “digital nomad” camp in Thailand.

In an interview, Taihuttu said he has no regrets. The crypto-day-trader’s portfolio is in the black, and he predicts one bitcoin will be worth between $ 30,000 and $ 50,000 by year-end.

His backup plan is to write a book and perhaps make a movie about his family’s experience.

“We are not it in it to become bitcoin millionaires,” Taihuttu said.

Reporting by Anna Irrera; Editing by Steve Orlofsky; Editing by Lauren Tara LaCapra

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