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That's one of the standard metrics to judge any currency. Bitcoin is not advertised as an asset but as a digital currency. But it has clearly become primarily a

by axlee 7y ago

That's one of the standard metrics to judge any currency. Bitcoin is not advertised as an asset but as a digital currency. But it has clearly become primarily an asset, given the minimal uses of it as a currency.

paulddraper 7y ago
Once transaction fees exceeded $20 back in 2017, it was pretty clear Bitcoin was an asset not a currency. Horrible properties for a currency. Usual properties for a collectible asset.
- cwkoss 7y ago
  I'd argue that IRS tax treatment of Bitcoin as an asset (and thus making every currency-like purchase - even when exchanging for good or services - a taxable event) is another significant factor. Fees may have made this inevitable, but having to deal with taxes has definitely made me much more wary of using it for small purchases. Bitcoin tax accounting is tedious, and I think once a company solves non-custodial record keeping for the purposes of automated tax accounting, it will increase velocity of spending.
  - paulddraper 7y ago
    The IRS treats essentially everything ownable as an asset: gold, paper currency, bitcoin, art, postage stamps. You obviously never pay capital gains tax on USD, because it never changes value relative to USD. AFAIK a Bitcoin is no different than a Euro tax-wise.
    - cwkoss 7y ago
      I am not an accountant and may be wrong, but if a US citizen exchanges $1000 USD to euro, and then euro appreciates 10%, and then they spend that euro to make a purchase, I was under the impression that that purchase is not subject to capital gains. Exchanging back to USD would be, but I thought currency classification exempted cap gains on purchases of goods and services. Am I wrong? Have never held any significant amount of foreign currency, so have never dealt with this personally.
      - paulddraper 7y ago
        My understanding is that a gain or loss in that currency is recognized upon spending/trading it. Quick search brought me to https://thismatter.com/money/tax/foreign-currency-transactions-taxation.htm https://thismatter.com/money/tax/foreign-currency-transactio... which agrees with that. Like use tax, I suspect it is often just neglected.
        cwkoss 7y ago
        Interesting, thanks for correcting me. It looks like there may be an exemption for small amounts under $200 (https://smallbusiness.chron.com/foreign-currency-exchange-tax-issues-77894.html https://smallbusiness.chron.com/foreign-currency-exchange-ta...), which would make Bitcoin much more functional (if it would apply to Bitcoin anyways, mute point as BTC is classified as an asset), but not to the extent of my misconception.
        xur17 7y ago
        The lack of a de minimis exemption for bitcoin is key here, and a major way in which it's not treated like a foreign currency.
      - solotronics 7y ago
        Yeah there is specific tax code for gains on foreign currency. It is actually worse than capital gains tax. https://smallbusiness.chron.com/irs-tax-laws-regarding-foreign-currency-81346.html https://smallbusiness.chron.com/irs-tax-laws-regarding-forei...
    - modeless 7y ago
      There's a gigantic difference: an exemption for almost all personal transactions. In practice almost every foreign currency transaction you make is exempt[1]. The IRS doesn't allow that exemption for Bitcoin and technically you are required to calculate and report gains for every single Bitcoin transaction you make (regardless of whether dollars are involved). Imagine reporting every Starbucks purchase on your tax return. It's a completely unreasonable burden for a currency. [1] The actual rule is $200 of capital gains per transaction, and you'd usually have to spend substantially more than $1000 in a single transaction to get there.
      - paulddraper 7y ago
        No, the $200 limit is the limit on the exchanges for the year. EUR/USD exchange rate changed 3-4% from a year ago, so spending $5-6k in Euros would surpass the threshold (though in this particular case, as a loss). The BTC/USD exchange rate more than doubled over the past year, so you'd have to spend less than a few hundred dollars to remain under <$200 gains. The $200 tax exemption would make little practical difference. Even for traditional stable currencies, it's relatively easy to exceed that in any significant use. And with BTC's historical volatility, it's virtually guaranteed.
AndrewUnmuted 7y ago
Bitcoin can't be a currency until it is legal to use as a form of tender. These days, I see bitcoin like the ivory trade. Plenty of it out there, not much public movement, and it is illegal to do with it what everyone wants to do with it. So people are hoarding it while appearing to distance themselves from it for tax/legality purposes. I no longer look into this topic too regularly so this may be a naive thing to say, but there are far more naive people than me out there with money in bitcoin...
rolltiide 7y ago
That same standard exists for currencies too! How much of M0 is of the total supply How does everyone walk past good criticisms of bitcoin and bang their head against a wall of the dumbest criticisms ever? I mean specifically holding Bitcoin to a fictional higher standard that no asset satisfies just because they dont respect that particular asset

by axlee 7y ago

paulddraper 7y ago

Once transaction fees exceeded $20 back in 2017, it was pretty clear Bitcoin was an asset not a currency. Horrible properties for a currency. Usual properties for a collectible asset.

cwkoss 7y ago
I'd argue that IRS tax treatment of Bitcoin as an asset (and thus making every currency-like purchase - even when exchanging for good or services - a taxable event) is another significant factor. Fees may have made this inevitable, but having to deal with taxes has definitely made me much more wary of using it for small purchases. Bitcoin tax accounting is tedious, and I think once a company solves non-custodial record keeping for the purposes of automated tax accounting, it will increase velocity of spending.
- paulddraper 7y ago
  The IRS treats essentially everything ownable as an asset: gold, paper currency, bitcoin, art, postage stamps. You obviously never pay capital gains tax on USD, because it never changes value relative to USD. AFAIK a Bitcoin is no different than a Euro tax-wise.
  - cwkoss 7y ago
    I am not an accountant and may be wrong, but if a US citizen exchanges $1000 USD to euro, and then euro appreciates 10%, and then they spend that euro to make a purchase, I was under the impression that that purchase is not subject to capital gains. Exchanging back to USD would be, but I thought currency classification exempted cap gains on purchases of goods and services. Am I wrong? Have never held any significant amount of foreign currency, so have never dealt with this personally.
    - paulddraper 7y ago
      My understanding is that a gain or loss in that currency is recognized upon spending/trading it. Quick search brought me to https://thismatter.com/money/tax/foreign-currency-transactions-taxation.htm https://thismatter.com/money/tax/foreign-currency-transactio... which agrees with that. Like use tax, I suspect it is often just neglected.
      - cwkoss 7y ago
        Interesting, thanks for correcting me. It looks like there may be an exemption for small amounts under $200 (https://smallbusiness.chron.com/foreign-currency-exchange-tax-issues-77894.html https://smallbusiness.chron.com/foreign-currency-exchange-ta...), which would make Bitcoin much more functional (if it would apply to Bitcoin anyways, mute point as BTC is classified as an asset), but not to the extent of my misconception.
        xur17 7y ago
        The lack of a de minimis exemption for bitcoin is key here, and a major way in which it's not treated like a foreign currency.
    - solotronics 7y ago
      Yeah there is specific tax code for gains on foreign currency. It is actually worse than capital gains tax. https://smallbusiness.chron.com/irs-tax-laws-regarding-foreign-currency-81346.html https://smallbusiness.chron.com/irs-tax-laws-regarding-forei...
  - modeless 7y ago
    There's a gigantic difference: an exemption for almost all personal transactions. In practice almost every foreign currency transaction you make is exempt[1]. The IRS doesn't allow that exemption for Bitcoin and technically you are required to calculate and report gains for every single Bitcoin transaction you make (regardless of whether dollars are involved). Imagine reporting every Starbucks purchase on your tax return. It's a completely unreasonable burden for a currency. [1] The actual rule is $200 of capital gains per transaction, and you'd usually have to spend substantially more than $1000 in a single transaction to get there.
    - paulddraper 7y ago
      No, the $200 limit is the limit on the exchanges for the year. EUR/USD exchange rate changed 3-4% from a year ago, so spending $5-6k in Euros would surpass the threshold (though in this particular case, as a loss). The BTC/USD exchange rate more than doubled over the past year, so you'd have to spend less than a few hundred dollars to remain under <$200 gains. The $200 tax exemption would make little practical difference. Even for traditional stable currencies, it's relatively easy to exceed that in any significant use. And with BTC's historical volatility, it's virtually guaranteed.

AndrewUnmuted 7y ago

Bitcoin can't be a currency until it is legal to use as a form of tender. These days, I see bitcoin like the ivory trade. Plenty of it out there, not much public movement, and it is illegal to do with it what everyone wants to do with it. So people are hoarding it while appearing to distance themselves from it for tax/legality purposes. I no longer look into this topic too regularly so this may be a naive thing to say, but there are far more naive people than me out there with money in bitcoin...

rolltiide 7y ago

That same standard exists for currencies too! How much of M0 is of the total supply How does everyone walk past good criticisms of bitcoin and bang their head against a wall of the dumbest criticisms ever? I mean specifically holding Bitcoin to a fictional higher standard that no asset satisfies just because they dont respect that particular asset