Bitcoin virtual currency is on verge of collapse

[Notspot]

Bitcoin sure does bring up strong emotions in people.

Originally I was pro bitcoin, I even have some, but the more I read about it the more skeptical I became, it's so full of contradictions. There are too many issues to still be ironed out.

There are some brilliant evangelists like Andreas Antonopoulos and Chris Ellis (Feathercoin guy), who I believe will take it to the next level in time and are definitely on the right track with future uses. But currently it's not ready for market, I'd give it at least another 5 years before it's ready for mass use.

At the moment the majority of interest in bitcoin is still gambling (oops, trading) on the markets, and these people have very little interest in real world applications for the currency, they are just lining their pockets (or lining other peoples whilst trying) - which ironically clashes directly with the early adopters view (who also still hold the majority of coins, another issue which needs to be addressed).

It's moving fast but it's just not ready yet. Trying to run before it can walk could be very damaging in the long run.

[Sherlock]

It might be something as 5 yrs on average, but it does not depend on the currency or community now IMO. BTC became as big as it can be under current circumstances. It is not a currency yet. Now only the collapse of some currency outside or some more restrictions of governments can give boost to BTC.

Until some really bug shakes happen, there is not enough advantage of using BTC that would cause BTC to prevail.

[Imperator]

Bitcoin sure does bring up strong emotions in people.

Originally I was pro bitcoin, I even have some, but the more I read about it the more skeptical I became, it's so full of contradictions. There are too many issues to still be ironed out.

There are some brilliant evangelists like Andreas Antonopoulos and Chris Ellis (Feathercoin guy), who I believe will take it to the next level in time and are definitely on the right track with future uses. But currently it's not ready for market, I'd give it at least another 5 years before it's ready for mass use.

At the moment the majority of interest in bitcoin is still gambling (oops, trading) on the markets, and these people have very little interest in real world applications for the currency, they are just lining their pockets (or lining other peoples whilst trying) - which ironically clashes directly with the early adopters view (who also still hold the majority of coins, another issue which needs to be addressed).

It's moving fast but it's just not ready yet. Trying to run before it can walk could be very damaging in the long run.

You are correct, however do note that 50% of the daily bitcoin transactions are related to bitcoin gambling sites, and we are in the gambling industry. It already passed Western Union in terms of daily transaction volume. So there is money to be made within our industry and if someone waits 5 years, he might be too late to join the club. That's just an opinion though.

I couldn't resist but to post this here:



Honestly I am not sure why the count it as 1%, since bitcoin transactions are free (they are possibly referring to 3rd party bitcoin payment processing services), but it will still save $210 billion. Goldman Sachs is kind of a big deal in finance.

[-Shay-]

Goldman Sachs is kind of a big deal in finance.

Goldman Sachs' Research Department projecting out potentials. Now that is credible. I think they still have a strong buy rating on Enron.

[Imperator]

Alright, forget about Goldman Sachs... Let's mention South by Southwest, one of the most important tech events worldwide. Large portion of the people who invented what internet is today, are standing behind bitcoin.

http://dealbook.nytimes.com/2014/03/...tcoin-at-sxsw/

Also, Wall Street joins us:

http://www.marketwatch.com/story/bit...hed-2014-03-12

[Imperator]

Rick, is this the right time to change the topic of this thread? It cannot be any more misiformative than now. Bitcoin is not on the verge of collapse, it is on the verge of rapid growth and mass adoption.

[-Shay-]

Rick, is this the right time to change the topic of this thread? It cannot be any more misiformative than now. Bitcoin is not on the verge of collapse, it is on the verge of rapid growth and mass adoption.

Get the author of the LA Times to change the headline of his article. If anything, the news article in the Times is inaccurate or sensational. Considering Rick started this thread based on the article's headline, I'd say it (the thread title) is accurate.

[TheGooner]

You are correct, however do note that 50% of the daily bitcoin transactions are related to bitcoin gambling sites, and we are in the gambling industry. It already passed Western Union in terms of daily transaction volume. So there is money to be made within our industry and if someone waits 5 years, he might be too late to join the club. That's just an opinion though.

I couldn't resist but to post this here:



Honestly I am not sure why the count it as 1%, since bitcoin transactions are free (they are possibly referring to 3rd party bitcoin payment processing services), but it will still save $210 billion. Goldman Sachs is kind of a big deal in finance.

They count it as 1% because that's that average difference between the buy/sell bids on most markets. Even if you only hold for a short time and there is no movement you are likely to pay 1% costs on the BUY bid you paid and the subsequent SELL bid you accepted. I'm amazed that the mantra of "no cost" continues with BitCoin advocates - but I suspect that's because even they do not practically use it.

Additionally, I pay 0.5% on my forex conversions with a major bank - just 0.5%. Yes there are some rules about size of transactions - but that's simple to do if you have multiple currency accounts and can accumulate funds to do monthly or quarterly transactions.

This report is either bogus - or badly researched.

[Imperator]

You do have a point, yes.

Xapo Ltd., a provider of secure online storage for Bitcoins, has raised $20 million in a first round of funding led by venture capital firm Benchmark.http://www.bloomberg.com/news/2014-0...ider-xapo.html

[John US Traffic]

Things looking brighter for Bitcoin again now. Mt. Gox was just a big ugly bump in the road even though it was a big one. Possible regulatory issues obviously still a question mark. Someone will need to tell the author of this article that it's not a payment method or currency or both, however (lol):

Bitcoin software gets security update

But the virtual currency has weathered innumerable negative events over the past five years and is still seeing growing adoption by businesses and retailers as an alternative payment platform.

[universal4]

It is starting to look like it will be taxed as a commoditiy.

New York has already stated it will begin taking steps toward regulation, and the CFTC is looking into how to progress and expects to have something in place by Spring or Summer.
http://www.coindesk.com/us-mulls-reg...s-commodities/

I see this as possibly being a bit problematic, since there are specific guidelines with commodities and capital gains taxes when held at the one year mark.

Rick
Universal4

[TheGooner]

Bitcoin and all virtual currencies are still very much up in the air regarding tax treatments. And the rules would vary depending on buyer/seller jurisdiction and whether any specific laws were enacted.

Basically, it's pretty new - has no special legislative protections or rules, so typically sits as a commodity that should be accounted for and annually taxed as such.

Example : In New Zealand ...
1/ SALES TAX
If bitcoin is NOT a currency or a share - then it has no special financial standing as a tradeable investment and is an asset - then local sales of all bitcoins should also include a 15% GST (sales tax) charge. (Locally here Property / Shares / Bonds and Metals have a special 0% rate)

2/ CAPITAL GAINS TAX
Additionally, as bitcoin holdings cannot gain interest at present, then the local Inland Revenue are likely to interpret that the purchase of each bitcoin would be eligible for Capital Gains tax when sold - because the bitcoins were purchased specifically for the purposes of later resale.

Notes to compare against Gold and Silver.
1/ Gold and Silver that is 99% pure (or more) have express legislation that states no sale tax.
2/ Precious Metal hedging as an asset class also has explicit investment status and typically ZERO capital gain is paid on private metal sales.

So in MY country - the statement that bitcoin is NOT a currency is NOT good. It might sound a smarmy way to get around regulation, but in fact it opens the bitcoin (and all virtual coin) holdings up to being traded and taxed as an asset. Useless as an investment vehicle.

Other countries will have different interpretations (most have a wider ranging capital gains tax), but generally the treatment will be similar with sales tax and capital gains tax eligible on all assets. (see link below for A view on US citizen liability)

=============

Of course, very few people currently follow any of this tax treatment, believing that they and their bitcoin dealings are anonymous. Now knowledgeable people understand that isn't true - and every bitcoin's financial history carefully records the wallet numbers that it has been associated with.

Eventually, governments will construct a register of bitcoin wallets and the people / enterprises associated with them - and retrospective tax statements will be produced, with penalties and interest accrued for outstanding tax charges on historical trades.

Ignorance of your tax position is usually no excuse in the eyes of the inland revenue - they can reasonably say that IF you traded in these assets and sold them to make a profit then your should have known and expected to pay these taxes.

If you make a profit of several hundred dollars per bitcoin, you should expect that your federal or state government wants it's share of taxes, be that income taxes, capital gains, or whatever. 10-40% of whatever profit you make belongs to the government.

It's the same as all OUR affiliate businesses. Record the transactions, measure the profits, file the accounts ... and PAY THE TAXES!


Pretending otherwise eventually gets you in court as a tax cheat.


==============

Here is Forbes Magazine view on the anonymity and the tax situation for American citizens :
http://www.forbes.com/sites/cameronk...lways-taxable/

==============

Finally, if you are intested in virtual currencies - then I find that this site Rick linked to ( http://www.coindesk.com/ ) is a good source of news. It reports good / bad / and ugly news - and does not appear to be a shrill or a grinch about the idea.

[John US Traffic]

I can only speak about issues involving the US. Income is income, period, unless the gov says otherwise or specifically says it's nontaxable. You may also have to consider what is known as the Alternative Minimum Tax (AMT). So the bottom line is that anyone thinking all this talk about Bitcoin being "anonymous" or private or anything similar having anything to do with being immune to taxation is only very misinformed or deluding themselves big time.

If I had bought 10,000 Bitcoin for $1 and cashed out (i.e., "realized" income) at $1,000 for $10,000,000, for example, I always had every intention of declaring (whatever hypothetical amount such as) $9,990,000 in taxable income. No if's, an's, or but's. Anyone thinking otherwise is making a big mistake and also risking criminal penalty for blatant evasion, let alone regular penalty and interest.

If, however, the gov allowed it to be treated as capital gains income subject to less tax than ordinary income, all the better for sure. You then declare the same amount and get to pay much less courtesy of Uncle Sam.

Regarding any other kind of taxation, that I have no idea about, except that of course you would almost certainly have had to pay some state and/or local income tax depending on your jurisdiction. Other types of possible taxes are a question mark to me, but the main thing is to declare all income either as ordinary or capital gains if allowed and then proceed as far as possible.

[universal4]

Very well stated Gooner, thanks for the input.

So the bottom line is that anyone thinking all this talk about Bitcoin being "anonymous" or private or anything similar having anything to do with being immune to taxation is only very misinformed or deluding themselves big time.

Totally agree, but it was (and still is to a degree) some of the selling points that some people have used to hype bitcoin since the beginning.

On the capital gains bit, be sure to research that well as I do believe in some instances the asset must be held more then 1 year.

I wonder if the US will attempt to structure things in a similar manner so that exchanges will have to cover some taxes on sales/exchanges in addition to what the consumer or investor also pays.

I also wonder as it gets closer to this becoming a reality if there will be a massive sell-off.

Rick
Universal4

[-Shay-]

On the capital gains bit, be sure to research that well as I do believe in some instances the asset must be held more then 1 year.

>1 year = 15% capital gains tax,
<1 year = taxed at your ordinary income rate

(generally speaking)

[-Shay-]

The lovely IRS just cleared up how bitcoin is treated for tax purposes in the US.

[muffincrumbs]

Wow Shay what a nice light read for my Wednesday morning. Pretty self explanatory there, but I especially love the little bit about how you are to pay taxes on all bitcoin transaction prior to this notice. It even addresses mining and states that it is to be taxed as self-employment. I bet those people who bought their house using bitcoin are not having a good day.

[Tom Givony]

MtGox was one of the biggest heists in history !