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I wish they had kept the like-kind treatment for crypto-to-crypto exchanges. Or that they had given very clear guidelines and rules on crypto taxation. Or that

I wish they had kept the like-kind treatment for crypto-to-crypto exchanges. Or that they had given very clear guidelines and rules on crypto taxation. Or that they had lowered crypto tax rates a little because it's highly risky anyways. Nowadays, I see a lot of people just borrowing against their holdings to avoid triggering taxes, especially for long term holders who might be up 1000+%, there's really no point in cashing out, since a significant chunk will just go to the gov (especially if you're in California or New York).

Pfhreak 5y ago
There's "really no point" in cashing out returns of 1000%? If I had put 100k in, my coins would be worth 1M. Even if my taxes were 30%, I'd be walking away with 730k. That's an astronomical gain.
- zikduruqe 5y ago
  A fine is a tax for doing bad. A tax is a fine for doing well.
  - adriand 5y ago
    A tax is a subscription fee for the privileges of citizenship. There are many millions of people who would happily become "subscribers" in return for becoming US citizens.
    - TheGigaChad 5y ago
      Suck my dick.
    - Consultant32452 5y ago
      Failing/refusing to pay a subscription fee does not, generally, result in you getting thrown in a cage with rapists and murderers.
      - tablespoon 5y ago
        > Failing/refusing to pay a subscription fee does not, generally, result in you getting thrown in a cage with rapists and murderers. If you fail to pay the subscription fee for your gym, but break in to use the equipment anyway, it might.
        itsyaboi 5y ago
        To take the analogy a step further, a gym subscription is optional. Paying taxes is not.
        tablespoon 5y ago
        > To take the analogy a step further, a gym subscription is optional. Paying taxes is not. You're pushing the analogy too far. You're not an autarky, there's plenty of stuff you have to pay for that isn't optional (e.g. food, shelter, etc.).
        deleted 5y ago
        [deleted]
        Consultant32452 5y ago
        Sometimes local mobs force you to pay them protection money. If you don't pay, they will take your property or even commit violence against you, exactly like the state. If you do pay, they will provide valuable services to you such as making sure you don't get robbed. Do you feel it would be reasonable to call this a "subscription fee"?
    - legolas2412 5y ago
      Hmm,i wonder why i as a non immigrant don't qualify for this citizenship even after paying all taxes, including FICA
      - robocat 5y ago
        Do you earn your money from that system? Salary taxation usually means you are earning your dollars by being part of a functioning society. There are billions of people who would happily become "subscribers" to a US job market, even if the offer required that 50% of their income was ritually burned for no benefit to the “subscriber”. Now capital gains are perhaps a different argument…
      - notyourwork 5y ago
        Do you use roads, sidewalks and other public infrastructure? If so you should pay into the system.
  - Pfhreak 5y ago
    A tax is (a tax for doing bad) for doing well? You may have a tautology to clean up there, bud.
    - ddxxdd 5y ago
      If you try to apply the Peano Axioms on pithy aphorisms, you're gonna have a bad time.
      - kvathupo 5y ago
        At the expense of the pot calling the kettle black, this comment epitomizes behavior that I don't like to see on HN: the condescending and incorrect use of technical jargon in an internet argument that adds no new insight. In what way whatsoever are the natural numbers relevant to the post, let alone parent comment? Please rethink signal-boosting off-topic comments in the future.
- rawtxapp 5y ago
  Sure, but you can borrow 730k and still hold on to the asset, why not do it?
  - TuringNYC 5y ago
    Because if your coins go down to $100k, you're going to get margin called on your borrow. Given the volatility of crypto, you wouldnt want to borrow more than 10% of your funds.
    - rawtxapp 5y ago
      Yes, you have to be carefully not to get margin-called, from what I've seen most people that have over 10M+$, tend to borrow up to 25-30% of their collateral's value (for example[1], this person borrowed 82M$ using 228M$ worth of collateral). 1: https://defiexplore.com/cdp/9167 https://defiexplore.com/cdp/9167
      - user-the-name 5y ago
        There is no way to be "careful not to get margin-called", since crypto markets are heavily manipulated in order to force margin calls. Trading on margin on crypto markets is a fool's game.
        rawtxapp 5y ago
        Notice that borrowing != trading on margin, you can certainly buy back into the asset, but you can also do lots of other things with the money. You can be careful with your borrowing, like the example I gave, in that case, Bitcoin would need to drop by 50% before that person get's liquidated and even if that happens, they still have the 82M$ in cash.
        TuringNYC 5y ago
        >> You can be careful with your borrowing, like the example I gave, in that case, Bitcoin would need to drop by 50% before that person get's liquidated and even if that happens, they still have the 82M$ in cash. Not quite...now you still owe capital gains tax on the forced liquidation price (minus cost basis)! So perhaps a large part of your $82M draw goes into taxes.
gruez 5y ago
>Nowadays, I see a lot of people just borrowing against their holdings to avoid triggering taxes That seems excessively risky. Let's say you borrowed some USD using bitcoin as collateral, and bitcoin drops. Then what? Presumably you've already spent the money so now you're in debt and can't pay it off because your bitcoin holdings have dropped.
- rawtxapp 5y ago
  It'll get liquidated if it drops by say 30%, but that's what you would have paid in taxes anyways. You get the same amount of cash either way.
  - frankbreetz 5y ago
    wouldn't you have to pay taxes on the 70% left over and you wouldn't have enough to service the debt?
    - rawtxapp 5y ago
      Yes, so ideally, you wouldn't borrow so much to be margin called, it's over-collaterized, so you'll always have enough to service the debt.
      - medvezhenok 5y ago
        Would you go 3x Margin Long on the S&P 500 and then take out a loan against that to buy things? Because that's basically what you are doing if you take out a long against your crypto holdings. I would be very, very careful about touching it. This strategy, but applied to developing nation currencies and the dollar has ruined many an economy (ruble crisis, euro crisis, Asian currency crisis, etc). When your obligations are in a different currency than your assets, it's danger zone. People become blind to risk in a bull market - crypto can certainly drop 90+% and wipe out anything you have borrowed against it.
  - gruez 5y ago
    >It'll get liquidated if it drops by say 30%, Doesn't this trigger a taxable event? If not it seems like it's pretty easy to bypass taxes by borrowing against your bitcoin and then liquidating it if it drops 1%. In addition to that, since it's a loan, you're theoretically stuck paying interest on it forever. Assuming 5% APR, you'd reach break-even in about 5 years.
pessimizer 5y ago
> Nowadays, I see a lot of people just borrowing against their holdings Perverse incentives setting us up for disaster. I don't really care about crypto until it becomes heavily leveraged, after which it's basically 2008 again.
- rawtxapp 5y ago
  Unfortunately, it's even worse on some exchanges that offer up to 125x leverage to people who might not even understand what they're doing properly. That's why you see flash crashes every once in a while, couple weeks back there was billions of dollars liquidated.
- rhino369 5y ago
  It’s unlikely ever to be a 2008 like event. Mortgages were considered safe investments so banks leveraged to invest. No credible bank is going to leverage to speculate on crypto. They might create products to let their customers do it, but they’ll make sure their books have little exposure. They are selling shovels; not panning for gold.
RhysU 5y ago
> Or that they had lowered crypto tax rates a little because it's highly risky anyways. That'd be a fun principle applied to stocks. Pay less in capital gains as more leverage is employed. That's a wacky feedback loop to throw into any market.

Pfhreak 5y ago

There's "really no point" in cashing out returns of 1000%? If I had put 100k in, my coins would be worth 1M. Even if my taxes were 30%, I'd be walking away with 730k. That's an astronomical gain.

zikduruqe 5y ago
A fine is a tax for doing bad. A tax is a fine for doing well.
- adriand 5y ago
  A tax is a subscription fee for the privileges of citizenship. There are many millions of people who would happily become "subscribers" in return for becoming US citizens.
  - TheGigaChad 5y ago
    Suck my dick.
  - Consultant32452 5y ago
    Failing/refusing to pay a subscription fee does not, generally, result in you getting thrown in a cage with rapists and murderers.
    - tablespoon 5y ago
      > Failing/refusing to pay a subscription fee does not, generally, result in you getting thrown in a cage with rapists and murderers. If you fail to pay the subscription fee for your gym, but break in to use the equipment anyway, it might.
      - itsyaboi 5y ago
        To take the analogy a step further, a gym subscription is optional. Paying taxes is not.
        tablespoon 5y ago
        > To take the analogy a step further, a gym subscription is optional. Paying taxes is not. You're pushing the analogy too far. You're not an autarky, there's plenty of stuff you have to pay for that isn't optional (e.g. food, shelter, etc.).
        deleted 5y ago
        [deleted]
        Consultant32452 5y ago
        Sometimes local mobs force you to pay them protection money. If you don't pay, they will take your property or even commit violence against you, exactly like the state. If you do pay, they will provide valuable services to you such as making sure you don't get robbed. Do you feel it would be reasonable to call this a "subscription fee"?
  - legolas2412 5y ago
    Hmm,i wonder why i as a non immigrant don't qualify for this citizenship even after paying all taxes, including FICA
    - robocat 5y ago
      Do you earn your money from that system? Salary taxation usually means you are earning your dollars by being part of a functioning society. There are billions of people who would happily become "subscribers" to a US job market, even if the offer required that 50% of their income was ritually burned for no benefit to the “subscriber”. Now capital gains are perhaps a different argument…
    - notyourwork 5y ago
      Do you use roads, sidewalks and other public infrastructure? If so you should pay into the system.
- Pfhreak 5y ago
  A tax is (a tax for doing bad) for doing well? You may have a tautology to clean up there, bud.
  - ddxxdd 5y ago
    If you try to apply the Peano Axioms on pithy aphorisms, you're gonna have a bad time.
    - kvathupo 5y ago
      At the expense of the pot calling the kettle black, this comment epitomizes behavior that I don't like to see on HN: the condescending and incorrect use of technical jargon in an internet argument that adds no new insight. In what way whatsoever are the natural numbers relevant to the post, let alone parent comment? Please rethink signal-boosting off-topic comments in the future.
rawtxapp 5y ago
Sure, but you can borrow 730k and still hold on to the asset, why not do it?
- TuringNYC 5y ago
  Because if your coins go down to $100k, you're going to get margin called on your borrow. Given the volatility of crypto, you wouldnt want to borrow more than 10% of your funds.
  - rawtxapp 5y ago
    Yes, you have to be carefully not to get margin-called, from what I've seen most people that have over 10M+$, tend to borrow up to 25-30% of their collateral's value (for example[1], this person borrowed 82M$ using 228M$ worth of collateral). 1: https://defiexplore.com/cdp/9167 https://defiexplore.com/cdp/9167
    - user-the-name 5y ago
      There is no way to be "careful not to get margin-called", since crypto markets are heavily manipulated in order to force margin calls. Trading on margin on crypto markets is a fool's game.
      - rawtxapp 5y ago
        Notice that borrowing != trading on margin, you can certainly buy back into the asset, but you can also do lots of other things with the money. You can be careful with your borrowing, like the example I gave, in that case, Bitcoin would need to drop by 50% before that person get's liquidated and even if that happens, they still have the 82M$ in cash.
        TuringNYC 5y ago
        >> You can be careful with your borrowing, like the example I gave, in that case, Bitcoin would need to drop by 50% before that person get's liquidated and even if that happens, they still have the 82M$ in cash. Not quite...now you still owe capital gains tax on the forced liquidation price (minus cost basis)! So perhaps a large part of your $82M draw goes into taxes.

gruez 5y ago

>Nowadays, I see a lot of people just borrowing against their holdings to avoid triggering taxes That seems excessively risky. Let's say you borrowed some USD using bitcoin as collateral, and bitcoin drops. Then what? Presumably you've already spent the money so now you're in debt and can't pay it off because your bitcoin holdings have dropped.

rawtxapp 5y ago
It'll get liquidated if it drops by say 30%, but that's what you would have paid in taxes anyways. You get the same amount of cash either way.
- frankbreetz 5y ago
  wouldn't you have to pay taxes on the 70% left over and you wouldn't have enough to service the debt?
  - rawtxapp 5y ago
    Yes, so ideally, you wouldn't borrow so much to be margin called, it's over-collaterized, so you'll always have enough to service the debt.
    - medvezhenok 5y ago
      Would you go 3x Margin Long on the S&P 500 and then take out a loan against that to buy things? Because that's basically what you are doing if you take out a long against your crypto holdings. I would be very, very careful about touching it. This strategy, but applied to developing nation currencies and the dollar has ruined many an economy (ruble crisis, euro crisis, Asian currency crisis, etc). When your obligations are in a different currency than your assets, it's danger zone. People become blind to risk in a bull market - crypto can certainly drop 90+% and wipe out anything you have borrowed against it.
- gruez 5y ago
  >It'll get liquidated if it drops by say 30%, Doesn't this trigger a taxable event? If not it seems like it's pretty easy to bypass taxes by borrowing against your bitcoin and then liquidating it if it drops 1%. In addition to that, since it's a loan, you're theoretically stuck paying interest on it forever. Assuming 5% APR, you'd reach break-even in about 5 years.

pessimizer 5y ago

> Nowadays, I see a lot of people just borrowing against their holdings Perverse incentives setting us up for disaster. I don't really care about crypto until it becomes heavily leveraged, after which it's basically 2008 again.

rawtxapp 5y ago
Unfortunately, it's even worse on some exchanges that offer up to 125x leverage to people who might not even understand what they're doing properly. That's why you see flash crashes every once in a while, couple weeks back there was billions of dollars liquidated.
rhino369 5y ago
It’s unlikely ever to be a 2008 like event. Mortgages were considered safe investments so banks leveraged to invest. No credible bank is going to leverage to speculate on crypto. They might create products to let their customers do it, but they’ll make sure their books have little exposure. They are selling shovels; not panning for gold.

RhysU 5y ago

> Or that they had lowered crypto tax rates a little because it's highly risky anyways. That'd be a fun principle applied to stocks. Pay less in capital gains as more leverage is employed. That's a wacky feedback loop to throw into any market.