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Tangential question: could this, paradoxically, make Bitcoin a better medium of exchange, even if it becomes a bad speculative investment? Since the IRS is now

by neilk 13y ago

Tangential question: could this, paradoxically, make Bitcoin a better medium of exchange, even if it becomes a bad speculative investment? Since the IRS is now imposing a capital gains tax, that penalizes speculators. One of the issues with Bitcoin right now is that so many people are speculating (myself included) that it probably increases the volatility. If people are encouraged to spend, invest, or convert BTC into fiat currency ASAP, the price of a BTC should go down and remain very stable. In this scenario BTC becomes a decentralized money transfer network, for the most part. The only issue is going to be doing all the accounting for the government, but that seems eminently doable since every transaction is perfectly recorded. I'm not very experienced with financial matters, so perhaps someone can correct me.

asperous 13y ago
I think most people with tax knowledge expected Bitcoin to be taxed in this way in the us. To think the us would give Bitcoin some sort of special treatment is absurd. People will gamble on anything, as long as the price isn't fixed (and it will never be), there will always be those willing to throw money at it and dream big. Keep in mind: Big players haven't really yet bought in yet, Bitcoin is currently inflationary, and so on. Bitcoin certainly has little hope to become stable any time soon.
battani 13y ago
The IRS now treats bitcoin as a property asset, very much the same way they treat stocks, and not all stocks are prone to speculation. So this is expected news for those who hold bitcoin as an investment. The major impact of this decision will be on consumer adoption. Now, every time I want to make a transaction, I need to keep track of my taxes. I know that some wallet services are already developing ways to keep track of this automatically, but that's just an extra headache for the average consumer. This in essence will force consumers to think of bitcoin more as an investment, rather than a "currency" they can spend, and that will impede adoption. I know nobody here likes to hear it, and I feel like a lot here in SV are tuning this out, but bitcoin is really, really struggling to find a relevant use case with consumers. Regular consumers have absolutely no reason to use bitcoin. The "1-click" payment and 1% price discount are not appealing enough to the average Joe who already gets 1-2% cash back, airline miles, and consumer protection on his credit card (and 1-click checkouts on many e-commerce platforms). And more regulation isn't helping the "crypto-anarchist" decentralization angle either. Add price volatility to that and it kills the consumer use case. But... micro-payments? Consumers have always hated them. http://www.openp2p.com/pub/a/p2p/2000/12/19/micropayments.html http://www.openp2p.com/pub/a/p2p/2000/12/19/micropayments.ht... (Shirky, 2000) But... international transactions? Hard to beat the fees at https://transferwise.com https://transferwise.com. Bitcoin is great, FOR MERCHANTS. But consumer adoption is going to determine whether or not it succeeds on a grander scale. Unfortunately, Bitcoin does not solve a problem for consumers. Especially with tap-tap mobile payments around the corner. When it comes to money, consumers want to be insured and cuddled and protected and not run the risk (however small) of being criminally liable for transactions and have someone to speak with if they make an erroneous transaction or have their card stolen. And they can already do all that, which makes it tremendously difficult to compel them to change the habits they've had for in forever to adopt a system that does not provide them with significant advantages. I've been in bitcoin since 2011 and used to be a big believer, but I don't see bitcoin gaining traction with consumers, in part because of the huge regulatory risk. Any significant threat to the banks' business will be met with harmful regulatory control (friendly reminder: Wall Street banks fund the largest political lobbies in Washington). It could be destined to eternally remain an investment instrument (like gold) or find very targeted applications (like machine-to-machine payments). The underlying blockchain technology could be of more use (if adopted by the banking system, for example) but that is still far in the future.
- danieltillett 13y ago
  Bitcoin will always have value as a new way to think about money. It has started some really smart people thinking about the next system - this is really the norm for any major breakthrough. Nothing is ever perfect the first time or doesn't evolve as things change. I think that given how good bitcoin is has led some people to believe it is perfect.
  - battani 13y ago
    I agree. But it's very difficult to find a system that is so appealing to consumers that they'll make the switch, simply because consumers don't have a payments problem. Incremental reductions in friction (e.g. the consumer won't have to enter their credit card details, or, the consumer will save a percent on their purchase) are certainly not compelling enough to justify changing a deep and old habit. And a new system would have to figure out a way to mitigate the regulatory risk.
- 2arrs2ells 13y ago
  The "one-click" payment and 1% price discount is not gonna appeal enough to the average Joe who already has 1-2% cash back, airline miles, and consumer protection on his credit card (and 1-click checkouts on many e-commerce platforms). Yes! The credit card is an amazing tool for consumers, and I won't be giving mine up unless I get something significantly more amazing in return (Merchants would need to offer 5-10% discounts on purchases with bitcoin, for me to begin to be interested).
  - sitkack 13y ago
    Not sure how it relates to bitcoin, but Visa and Master Card will pull a merchants account if they give cash discounts. They do this, ofcourse, to make cash and cards equal in the eyes of the consumer even though the merchant takes a pretty sizeable hit.
    - willlll 13y ago
      Except this hasn't been true for several years in most states http://usa.visa.com/personal/get-help/checkout-fees.jsp http://usa.visa.com/personal/get-help/checkout-fees.jsp

by neilk 13y ago

asperous 13y ago

I think most people with tax knowledge expected Bitcoin to be taxed in this way in the us. To think the us would give Bitcoin some sort of special treatment is absurd. People will gamble on anything, as long as the price isn't fixed (and it will never be), there will always be those willing to throw money at it and dream big. Keep in mind: Big players haven't really yet bought in yet, Bitcoin is currently inflationary, and so on. Bitcoin certainly has little hope to become stable any time soon.

battani 13y ago

The IRS now treats bitcoin as a property asset, very much the same way they treat stocks, and not all stocks are prone to speculation. So this is expected news for those who hold bitcoin as an investment. The major impact of this decision will be on consumer adoption. Now, every time I want to make a transaction, I need to keep track of my taxes. I know that some wallet services are already developing ways to keep track of this automatically, but that's just an extra headache for the average consumer. This in essence will force consumers to think of bitcoin more as an investment, rather than a "currency" they can spend, and that will impede adoption. I know nobody here likes to hear it, and I feel like a lot here in SV are tuning this out, but bitcoin is really, really struggling to find a relevant use case with consumers. Regular consumers have absolutely no reason to use bitcoin. The "1-click" payment and 1% price discount are not appealing enough to the average Joe who already gets 1-2% cash back, airline miles, and consumer protection on his credit card (and 1-click checkouts on many e-commerce platforms). And more regulation isn't helping the "crypto-anarchist" decentralization angle either. Add price volatility to that and it kills the consumer use case. But... micro-payments? Consumers have always hated them. http://www.openp2p.com/pub/a/p2p/2000/12/19/micropayments.html http://www.openp2p.com/pub/a/p2p/2000/12/19/micropayments.ht... (Shirky, 2000) But... international transactions? Hard to beat the fees at https://transferwise.com https://transferwise.com. Bitcoin is great, FOR MERCHANTS. But consumer adoption is going to determine whether or not it succeeds on a grander scale. Unfortunately, Bitcoin does not solve a problem for consumers. Especially with tap-tap mobile payments around the corner. When it comes to money, consumers want to be insured and cuddled and protected and not run the risk (however small) of being criminally liable for transactions and have someone to speak with if they make an erroneous transaction or have their card stolen. And they can already do all that, which makes it tremendously difficult to compel them to change the habits they've had for in forever to adopt a system that does not provide them with significant advantages. I've been in bitcoin since 2011 and used to be a big believer, but I don't see bitcoin gaining traction with consumers, in part because of the huge regulatory risk. Any significant threat to the banks' business will be met with harmful regulatory control (friendly reminder: Wall Street banks fund the largest political lobbies in Washington). It could be destined to eternally remain an investment instrument (like gold) or find very targeted applications (like machine-to-machine payments). The underlying blockchain technology could be of more use (if adopted by the banking system, for example) but that is still far in the future.

danieltillett 13y ago
Bitcoin will always have value as a new way to think about money. It has started some really smart people thinking about the next system - this is really the norm for any major breakthrough. Nothing is ever perfect the first time or doesn't evolve as things change. I think that given how good bitcoin is has led some people to believe it is perfect.
- battani 13y ago
  I agree. But it's very difficult to find a system that is so appealing to consumers that they'll make the switch, simply because consumers don't have a payments problem. Incremental reductions in friction (e.g. the consumer won't have to enter their credit card details, or, the consumer will save a percent on their purchase) are certainly not compelling enough to justify changing a deep and old habit. And a new system would have to figure out a way to mitigate the regulatory risk.
2arrs2ells 13y ago
The "one-click" payment and 1% price discount is not gonna appeal enough to the average Joe who already has 1-2% cash back, airline miles, and consumer protection on his credit card (and 1-click checkouts on many e-commerce platforms). Yes! The credit card is an amazing tool for consumers, and I won't be giving mine up unless I get something significantly more amazing in return (Merchants would need to offer 5-10% discounts on purchases with bitcoin, for me to begin to be interested).
- sitkack 13y ago
  Not sure how it relates to bitcoin, but Visa and Master Card will pull a merchants account if they give cash discounts. They do this, ofcourse, to make cash and cards equal in the eyes of the consumer even though the merchant takes a pretty sizeable hit.
  - willlll 13y ago
    Except this hasn't been true for several years in most states http://usa.visa.com/personal/get-help/checkout-fees.jsp http://usa.visa.com/personal/get-help/checkout-fees.jsp