Should You Join the Crypto Craze?


In February, Tesla announced in an SEC filing that it bought $1.5 billion in bitcoin. The company said while its goal is to accept payments in bitcoin, it also bought the block chain-based currency for “more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity.” Bitcoin boomed in 2020, rising 400 percent over the course of the year and topping $50,000 per bitcoin for the first time in early 2021, with Tesla CEO Elon Musk leading the Twitter cheerleading.

Should business owners follow in Musk’s footsteps and replace some of their working cash with crypto? The bitcoin run-up prompted Microsoft co-founder Bill Gates to sound a warning about swimming with the cryptocurrency sharks. “My general thought would be that if you have less money than Elon, you should probably watch out,” he said in an interview. 

One of the first questions to ask is whether bitcoin or blockchain technology will integrate well into your business. There are technical requirements. The more fundamental question is whether you have the assets–and the risk appetite–to put funds into such a volatile market. Here are a few things you should consider:

Mind the Volatility

Yes, bitcoin has had a huge run, but it remains subject to the vicissitudes of Musk’s mood and other trading influences. There’s far less risk (and potential return) in the dollar. Since bitcoin behaves more like a stock than a currency, it’s crucial to think about it in terms of risk and reward, says LJ Suzuki, founder and CEO of CFOShare, a Denver-based finance and accounting outsourcing company for small businesses.

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Do you owe taxes on your bitcoin? The answer depends on when you bought and sold

Nick Vega is a money reporter at CNBC Make It. He previously covered the tech industry at the New York Post and Business Insider. Nick has a bachelor’s degree from Binghamton University and grew up in New York, N.Y. You can follow him on Twitter at @atNickVega.

After a relatively quiet few years following a short-lived surge in 2017, bitcoin rose again in late 2020, finishing the year with a single coin worth just shy of $30,000.

The blistering rally prompted many investors to invest in the cryptocurrency for the first time, while others who had been holding onto their bitcoin for some time took advantage of the token’s exploding price to sell some of their holdings for a profit.

But with Tax Day looming, some users will come face-to-face with the fact that they now owe taxes on those gains. Depending on when you bought and sold your bitcoin — as well as other factors, such as your income — you could be on the hook to pay.

Here’s what you need to know about reporting crypto profits on your 2020 tax return.

The IRS classifies virtual currencies as property. What does that mean?

Under U.S. tax law, bitcoin and other cryptocurrencies are classified as property and subject to capital gains taxes. But you only owe taxes when those gains are realized.

Just because your Coinbase portfolio drastically grew in value last year doesn’t mean that you’ll be writing out a check to Uncle Sam come April. Similar to trading stocks, you only need to list gains you earn from bitcoin as income when you decide to sell.

“If you never sell your bitcoin, you never owe cash,” Ben Weiss, COO of CoinFlip, the largest Bitcoin ATM provider in the country, tells CNBC Make It. “Bitcoin is treated like if you bought and sold a stock.”

I sold my bitcoin in 2020. How much do I owe?

It depends on how long you held the bitcoin and whether you sold it for a profit or a loss. If you owned your bitcoin for more than a year, you will pay a long-term capital gains tax rate on your profit, which is determined by your income. For single filers, the capital gains tax rate is 0% if you earn up to $40,000 per year, 15% if you earn up to $441,450 and 20% if you make more than that. This IRS worksheet can help you do the math.

If you owned your crypto for less than 12 months, the taxes you pay will be the same as your normal income tax rate.

If you sold your crypto for a loss, there’s some good news. “What people don’t always remember is that if you sell it, and you lost money, that’s a write-off of the amount you lost,” Weiss says. “It’s important that people look for not just where they made money, but also where they lost money.”

You can use your losses to lower your taxable income by a maximum of $3,000 ($1,500 for married filing separately) and can carry over any additional losses to future years.

If I only sold a little bit of bitcoin, do I still need to report it?

Yes. A profit of any amount needs to be reported to the IRS. For the first time, this tax season’s 1040 form includes a question about virtual currencies on the front page asking taxpayers if “at any time during 2020, did [they] receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”

“The IRS thinks there’s massive, massive underreporting in this area,” Ryan Losi, a certified public accountant (CPA) with Piascik tells Make It. “And they’re going to start targeting it.”

Indeed, the cryptocurrency question is the first item on the 1040 form, just below the individual’s contact information.

In the past, taxpayers may have been able to feign ignorance about their obligation to report crypto gains, but that won’t fly anymore. “Everyone who signs the tax return is signing that under penalty of perjury from the U.S. government,” Losi says.

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Analyst: Bitcoin Market Oversold and Ready for Major Bounce

By Martin J. Young

Bitcoin markets have been trending downwards since the middle of April but one analyst thinks this could be one big correction with markets primed for a major bounce.

At the time of writing, Bitcoin prices had reclaimed the $33,000 level for the first time in over a week. The king of crypto has made 1.5% on the day, building on yesterday’s momentum following a week of selling pressure.

Major Bounce Coming?

Analyst ‘CRYPTO₿IRB’ [@crypto_birb] has observed that there has been a complete reset on trend and momentum.

Analyzing the net unrealized profit/loss (NUPL), a measure of the difference between unrealized profit and unrealized loss to determine whether the network as a whole is currently in a state of profit or loss, the analyst added:

“NUPL suggests it’s as oversold as in September 2019 or September 2020 when it was trading at 6-9k usd. We’re lucky if we get 23-24k but market is ready for major bounce and final leg up in November-December imo,”

Technically, BTC would first need to reclaim the 50-day moving average which is currently at $35,200. For further strengthening of an uptrend, the next target is the 200-day MA which is at $44,670 according to Tradingview. The daily time-framed death cross which signaled the longer-term downtrend occurred on June 15.

The Bitcoin Fear and Greed Index, which can be used as a bellwether for market sentiment, is currently still in fearful territory however, registering a 23, or ‘extreme fear’

Bitcoin Still Fundamentally Solid

The fundamentals for Bitcoin markets are still pretty solid. Market mover Elon Musk made a big impact this week when he stated that his two companies, Tesla and SpaceX are holding Bitcoin. He added that they, in addition to himself, have no intentions to sell.

Naturally, there was a FOMO-driven pump in reaction to this and BTC has gained 10% since the revelations.

The China crackdown FUD also appears to be dissipating with the general consensus among industry experts being positive. The great miner migration has resulted in more mining being done using renewable energy. Even mainstream media is now reporting that Bitcoin mining is better for the environment than it was when China dominated the hash power.

The next few days or possibly weeks will determine the direction of the next big move as one always comes after such a long period of low volatility.

Martin has been writing on cybersecurity and infotech for over two decades. He has previous trading experience and has been covering developments in the blockchain and cryptocurrency industry since 2017.