Category Archives: Bitcoin
How to report bitcoin transactions depends on how they are classified.
Here is some TurboTax guidance to help you decide where to report transactions:
It depends on how those currencies were held and used. Based on that, the IRS determines whether to treat the currency as income or property.
Bitcoin used to pay for goods and services is taxed as income:
Bitcoin held as capital assets is taxed as property:
If you hold Bitcoin as a capital asset, you must treat it as property for tax purposes. General tax principles applicable to property transactions apply. In other words, just like stocks or bonds, any gain or loss from the sale or exchange of the asset is taxed as a capital gain or loss. Otherwise, the investor realizes ordinary gain or loss on an exchange.
Bitcoin received as incomeand then held and sold for profitis taxed as both:
Yes. The IRS is taking cryptocurrency very seriously, to the extent that they took the digital currency exchange Coinbase to court to obtain user records and now have a contract with digital forensics company Chainalysis to help track cryptocurrency transactions.
Note: Many people have been unsure of how to treat Bitcoin, so you may have recorded earnings incorrectly on prior returns. If you need to amend a previous return, follow these steps. (We also have a video that shows you how.)
Bitcoin is a digital currency, sometimes referred to as a cryptocurrency, best known as the world’s first truly decentralized digital currency. Bitcoin is traded on a peer-to-peer basis with a distributed ledger called the Blockchain, and the Bitcoin exchange rate to the US Dollar and other major currencies is determined by supply and demand as with other global exchange rates. The traded value of Bitcoin has proven volatile through various booms and busts in demand. Ultimately, however, many see Bitcoin as a store of value against government-backed fiat currencies.
Abbreviated as BTC, Bitcoin is actively traded against the world’s major currencies across decentralized markets. Bitcoins are kept in so-called Bitcoin wallets, which depend on private keys and cryptography to secure its Bitcoins to a specific entity or user.
By comparison to government-backed global currencies, Bitcoin remains fairly complex for the typical user to acquire and use in regular transactions. Growing interest and significant global investments in Bitcoin wallet and Blockchain technology have nonetheless made buying and selling Bitcoin far more accessible to the average user. And indeed growing acceptance by government entities have ameliorated the ambiguity of legal and regulatory status for Bitcoin and Bitcoin exchanges.
You can find historical price of Bitcoin on our chart and latest news and analysis on the Bitcoin exchange rate.
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Bitcoin (BTC) price: News & Live Chart – Trading Analysis …
Breaking Square earnings beat expectations, expected to top $1 billion in revenue in 2018
Square Inc. reported fourth-quarter earnings that beat expectations Tuesday, and projected that it will collect more than $1 billion in adjusted revenue in 2018 for the first time. The payments company reported a net loss of $16 million, or 4 cents a share, on net revenue of $616 million. After adjusting revenue for the costs of performing monetary transactions and earnings for stock-based compensation and other effects, Square claimed profit of 8 cents a share on revenue of $282.7 million. Analysts on average expected Square to report adjusted earnings of 7 cents a share on sales of $266.5 million, according to FactSet. In the same quarter a year ago, Square reported adjusted earnings of 5 cents a share on adjusted revenue of $191.9 million. Square also beat analysts’ expectations with its forecast, which called for the company’s first year topping $1 billion in adjusted revenue, after falling just short in 2017 with $984 million. The company expects adjusted profit of 43 cents to 47 cents a share on adjusted revenue of $1.3 billion to $1.33 billion in 2018; analysts were projecting adjusted earnings of 45 cents a share on adjusted revenue of $1.28 billion, according to FactSet. Despite the beat, Square shares bounced around in response to the report in after-hours trading Tuesday, trading between slight losses and gains.
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BitcoinIRA.com is a platform that connects consumers to qualified custodians, digital wallets and cryptocurrency exchanges. The company is not a custodian, is not a digital wallet and is not an exchange.
Self-directed investments processed through Bitcoin IRA have not been endorsed by the IRS or any government or regulatory agency. The IRS does not review, approve, or endorse any investments, including Bitcoins in an IRA.
BitcoinIRA.com facilitates the self-directed transfer from an existing IRA to Kingdom Trust. Kingdom Trust is a non-fiduciary trust company, registered and regulated in the state of South Dakota as a non-depository trust company. Kingdom Trust is a passive, non-discretionary custodian that does not provide, promote, endorse, or sell investment products and does not endorse or promote any individual investment advisor or investment sponsor. Kingdom Trust complies with IRS regulations regarding retirement accounts.
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Cryptocurrencies are very speculative investments and involve a high degree of risk. Investors must have the financial ability, sophistication/experience and willingness to bear the risks of an investment, and a potential total loss of their investment. See Risk Disclosures.
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Buy Bitcoin IRA | Bitcoin IRA Investment & Retirement Account …
In 2013, one bitcoin cost $20. In 2017, it costs $20 to send one bitcoin. With record highs, thriving adoption, and media attention, this should be a celebratory time for bitcoin believers. And yet its hard to shake the feeling that something isnt quite right. How did we reach a point where the worlds bank killer and Western Union crippler has become incapable of taking on the institutions it once sneered at? Bitcoin is hot as hell right now. But its also a mess.
Also read:Bitpay Plans to Use Bitcoin Cash for Payment Invoices and Debit Loads
By any reckoning, 2017 has been a phenomenal year for bitcoin. Even the currencys most ardent supporters would have struggled, 12 months ago, to predict the current state of affairs. But neither could they have envisaged, in their worst nightmares, it costing upwards of $20 to transfer a fraction of a coin. To chalk this year up as an unfettered success story calls for moving the goalposts and performing mental gymnastics. Bitcoin has made great leaps alright. Its just unfortunate that not all of them have been forwards.
It can be debated whether Satoshis white paper envisioned bitcoin as a P2P settlement for micro-transactions. What cant be debated is that bitcoin is effectively now unsendable and undependable for anything under a couple of hundred dollars. From the clearnet to the darknet, the conversation is the same: fees have become untenable. Despite this, bitcoins most ardent defenders remain in denial.
On some corners of the internet, questioning the gospel of Satoshi and the infallibility of bitcoin is heresy. I cant send a friend five dollars without a $15 transaction fee and this is the currency of the future? raged one Redditor, to which the first three responses on r/bitcoin ran:
Theres a modicum of truth to these rejoinders, but in the here and now, muh segwit or just wait for LN isnt much help.
Everyone has their price, a dollar figure at which theyd be willing to sell bitcoin, and also a figure theyre willing to pay to send it. Paying $20 to transfer $10 million of bitcoin seems reasonable. Paying the same amount to send $100 worth seems ridiculous. Bitcoin has been unsuitable for micro-transactions for some time, but its now reaching a stage where its unsuitable for mid-sized transactions.
Is bitcoin a store of wealth because thats its best use case, or has it simply morphed into one because no one can afford to move it?
Many of bitcoins new investors are of humble means, setting aside $50 a week or whatever they can spare to put into digital currency. Always store your coins in a wallet you hold the private key for, they were urged. Now theyre discovering that their only option is to store their bitcoin on an exchange, at least until their holdings reach a level where its practical to withdraw to a hardware wallet.
If cryptocurrencies were to be likened to energy sources, bitcoin would be coal: expensive to move and impractical to transport in small quantities. Its impossible to order a handful of coal every time you want to light a fire: its a sackful or nothing. Ethereum (gas) and bitcoin cash (hydro) are the opposite: cheap and on tap.
Coal does have one thing in its favor though longevity. In cryptocurrency terms, bitcoin is a veritable fossil. Its been there from the start and, thanks to its market dominance, brand recognition, and capital locked in, will be extremely hard to destroy. Scaling solutions will probably arrive, and transaction fees will eventually drop, though quite when is anyones guess. The question is if those solutions will arrive in time. Until then, bitcoin will continue to serve as coal fueling the furnace on the runaway Cryptocurrency Express: an indispensable hot mess.
What do you think is the solution to high fees? And what measures have you been taking to mitigate rising fees? Let us know in the comments section below.
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Bitcoin Fees Have Become Infeasible – Bitcoin News
The virtual currency rocketed above $9,000 for the first time on Sunday and was trading above $9,500 by Monday morning in Asia.
Stock markets around the world have been on a tear this year, but their gains are paltry compared with bitcoin’s. The digital currency, which only rose above $8,000 about a week ago, has surged an incredible 860% since the start of the year.
Despite skepticism from some top finance executives about bitcoin’s rise, experts say the latest gains appear to have been fueled by expectations that big professional investors — such as hedge funds and asset managers — could soon pour money into the currency.
Even a small portion of the cash managed by major funds “would make a dramatic impact on the bitcoin market,” said Thomas Glucksmann, head of marketing at Hong Kong bitcoin exchange Gatecoin.
Related: What is bitcoin?
The cryptocurrency has been gaining more legitimacy in some parts of the financial industry.
From early next month, investors should be able to trade bitcoin futures via the Chicago Mercantile Exchange, which is likely to help bolster the currency’s reputation among mainstream investors. Futures allow traders to bet on the future price of assets like currencies, metals and agricultural commodities.
The backing of a major exchange is encouraging institutional investors “to dip their toes into the bitcoin market,” Glucksmann said. He expects more professional investors to put money into it if it breaches $10,000.
Related: Can anything stop bitcoin?
The virtual currency has famously attracted the derision of JPMorgan Chase (JPM) CEO Jamie Dimon, who called it a “fraud” that would “eventually blow up.” But other leading figures in finance, including Goldman Sachs (GS) CEO Lloyd Blankfein have defended it.
Shane Chanel, an adviser at investment firm ASR Wealth Advisers, predicts bitcoin will hit $12,000 within the next six months.
“Greed will continue to drive the price over the short term,” he said. But he warned that any setbacks in the introduction of bitcoin futures over the next few weeks could prompt a “dramatic short-term tumble.”
Bitcoin’s path toward $9,500 hasn’t been smooth. It’s suffered periods of major volatility along the way.
Related: Bitcoin splits in two, here’s what that means
In September, it plunged as much as 20% after the Chinese government cracked down on offerings in the digital currency, prompting bitcoin exchanges to close their doors.
Earlier this month, it plummeted by up to 30% within the space of a few days, before quickly bouncing back, after it appeared traders were switching to rival cryptocurrencies.
Cryptocurrencies are virtual “coins” that are “mined” by computers completing complex algorithms. Bitcoin is the most famous and widely used one.
CNNMoney (Hong Kong) First published November 27, 2017: 1:01 AM ET
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Bitcoin’s incredible surge takes it above $9,500 – Nov. 27 …
In the latest blow, on Tuesday, an alternative virtual currency that is owned and operated by the same people as Bitfinex, known as Tether, announced that it had been hacked and lost around $30 million worth of digital tokens.
None of that has been enough to stop customers from pumping billions of dollars worth of virtual currency trades through Bitfinex in recent weeks on some days, the exchange claimed to be doing more trades, by dollar value, than some stock exchanges in the United States.
Even many people who believe in virtual currencies worry that the mixture of loose controls and booming trading at the worlds largest exchange is likely to cause trouble for all the investors piling into virtual currencies, even those who dont go near Bitfinex.
Im worried about the systemic risk that this centralized company poses, and Im worried that if they go down, they will take down the space with them, said Emin Gn Sirer, an associate professor of computer science at Cornell University, who has a track record of successfully predicting problems in the growing virtual currency industry.
The chief executive of Bitfinex and Tether, Jan Ludovicus van der Velde, said in an email on Tuesday that the financial position of the company has never been stronger.
Concerns over virtual currency exchanges are nothing new. The first and largest Bitcoin exchange, Mt. Gox, collapsed in 2014 after losing $500 million of customer money to hackers.
This year, law enforcement took down another large Bitcoin exchange, BTC-E, which was accused of being a way station for many of the Bitcoin flowing through online black markets and ransomware attacks.
Regulators in the United States and a few other countries have tried to tame the business, and the largest exchanges in the United States and Japan are now under official oversight.
Those regulated exchanges, though, are dwarfed by unregulated ones like Bitfinex and several that have popped up in South Korea, where regulators have been slow to act.
The liquid nature of the Bitcoin markets, flowing around national borders and laws, is a product of the virtual currencys unusual structure. Bitcoin is stored and moved through a decentralized network of computers that are not under the control of any single company or government.
This structure means that the virtual currency continues to be an easy target for people who want to manipulate its price or use it to launder money.
Unregulated, unregistered exchanges are a very big concern for the industry and the community broadly, said Kathryn Haun, a former federal prosecutor who is on the board of the American virtual currency company Coinbase.
The most frequent face of Bitfinex is its chief strategy officer, Phil Potter. Mr. Potter worked for Morgan Stanley in New York in the 1990s but lost his job after bragging at length in The New York Times about his $3,500 Rolex, his opulent lifestyle and his aggressive tactics for making money.
Mr. Potter, 45, runs Bitfinex alongside Mr. Van der Velde, a Dutch-speaking man living in Hong Kong, and Giancarlo Devasini, an Italian man who lives on the French Riviera, according to company filings in Hong Kong.
The company lost 1,500 Bitcoin, worth around $400,000, to a hacker in 2015. But the most damaging incident happened in August 2016 when a thief got almost 120,000 Bitcoin, worth around $75 million at the time.
The company spread out the losses to all customers even those who were not holding Bitcoin at the time of the hacking by forcing customers to take a 36 percent haircut or loss on any money at the exchange.
The lack of detail that Bitfinex provided about the hacking drove away some large customers like Arthur Hayes, the founder of Bitmex, a Hong Kong-based virtual currency exchange.
There are so many questions about them, Mr. Hayes said. All of this could be easily rectified by just showing all the figures.
Mr. van der Velde said the company had been as public and transparent as possible about the security incident in August 2016 given the ongoing criminal investigations.
Banks have also been put off by Bitfinexs operations. Wells Fargo said this year that it would no longer move money from Bitfinex accounts. Shortly after, Bitfinex said its main banks in Taiwan were shutting it off. Since then, it has moved between a series of banks in other countries, without telling customers where the exchanges money is stored.
But nothing has drawn more criticism than the operation of Tether, a virtual currency that is supposed to be tied or tethered to the value of a dollar.
Customers can buy Tether coins on Bitfinex and then transfer them to other virtual currency exchanges, providing a way to move dollars between countries without going through banks. Tether has also become a very popular way to buy Bitcoin. In recent weeks, a few hundred millions dollars worth of Tether has changed hands on a daily basis across several exchanges, according to data on CoinMarketCap.com.
Tether and Bitfinex have insisted that the two operations are separate. But leaked documents known as the Paradise Papers, which were made public this month, show that Appleby, an offshore law firm, helped Mr. Potter and Mr. Devasini, the Bitfinex operators, set up Tether in the British Virgin Islands in late 2014.
One persistent online critic, going by the screen name Bitfinexed, has written several very detailed essays on Medium arguing that Bitfinex appears to be creating Tether coins out of thin air and then using them to buy Bitcoin and push the price up.
Tether and Bitfinex have countered this criticism in statements on the companies websites and promised that every Tether is backed up by a dollar sitting in a bank account. In September, the companies provided an accounting document intended to prove that Tether is financed with real money.
Lewis Cohen, a lawyer at the law firm Hogan Lovells who advises many virtual currency projects, said the document, because of the careful way it was phrased, did not prove that the Tether coins are backed by dollars.
Even if they are, he said, Tether and Bitfinex appear to be violating laws in the United States and Europe that govern investments like Tether, which has qualities very similar to a money market mutual fund.
There are a long list of reasons that you dont want to deal with them, Mr. Cohen said of Tether.
On Tuesday, Tether announced that an external attacker had taken $30 million worth of Tether from the companys online wallets. The company said it was working to recover the coins.
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Warning Signs About Another Giant Bitcoin Exchange
The record of all Bitcoin transactions that these computers are constantly updating is known as the blockchain.
Criminals have taken to Bitcoin because anyone can open a Bitcoin address and start sending and receiving Bitcoins without giving a name or identity. There is no central authority that could collect this information.
Bitcoin first took off in 2011 after drug dealers began taking payments in Bitcoin on the black-market website known as the Silk Road. Although the Silk Road was shut down in 2013, similar sites have popped up to replace it.
More recently, Bitcoin has become a method for making ransom payments for example, when your computer is taken over by so-called ransomware.
The records of the Bitcoin network, including all balances and transactions, are stored on every computer helping to maintain the network about 9,500 computers in late 2017.
If the government made it illegal for Americans to participate in this network, the computers and people keeping the records in other countries would still be able to continue. The decentralized nature of Bitcoin is also one of the qualities that have made it popular with people who are suspicious of government authorities.
Anyone helping to maintain the database of all Bitcoin transactions the blockchain could change his or her own copy of the records to add more money. But if someone did that, the other computers maintaining the records would see the discrepancy, and the changes would be ignored.
Only a small percentage of all transactions on the Bitcoin network are explicitly illegal. Most transactions are people buying and selling Bitcoins on exchanges, speculating on future prices. A whole world of high-frequency traders has sprung up around Bitcoin.
People in countries with high inflation, like Argentina and Venezuela, have bought Bitcoin with their local currency to avoid losing their savings to inflation.
One of the most popular business plans is to use Bitcoin to move money over international borders. Large international money transfers can take weeks when they go through banks, while millions of dollars of Bitcoin can be moved in minutes. So far, though, these practical applications of Bitcoin have been slow to take off.
There are companies in most countries that will sell you Bitcoins in exchange for the local currency. In the United States, a company called Coinbase will link to your bank account or credit card and then sell you the coins for dollars. Opening an account with Coinbase is similar to opening a traditional bank or stock brokerage account, with lots of identity verification to satisfy the authorities.
For people who do not want to reveal their identities, services like LocalBitcoins will connect people who want to meet in person to buy and sell Bitcoins for cash, generally without any verification of identity required.
The price of Bitcoin fluctuates constantly and is determined by open-market bidding on Bitcoin exchanges, similar to the way that stock and gold prices are determined by bidding on exchanges.
Bitcoin mining refers to the process through which new Bitcoins are created and given to computers helping to maintain the network. The computers involved in Bitcoin mining are in a sort of computational race to process new transactions coming onto the network. The winner generally the person with the fastest computers gets a chunk of new Bitcoins, 12.5 of them right now. (The reward is halved every four years.)
There is generally a new winner about every 10 minutes, and there will be until there are 21 million Bitcoins in the world. At that point, no new Bitcoins will be created. This cap is expected to be reached in 2140. So far, about 16 million Bitcoin have been distributed.
Every Bitcoin in existence was created through this method and initially given to a computer helping to maintain the records. Anyone can set his or her computer to mine Bitcoin, but these days only people with specialized hardware manage to win the race.
Plenty. But these other virtual currencies do not have as many followers as Bitcoin, so they are not worth as much. As in the real world, a currency is worth only as much as the number of people willing to accept it for goods and services.
Bitcoin was introduced in 2008 by an unknown creator going by the name of Satoshi Nakamoto, who communicated only by email and social messaging. While several people have been identified as likely candidates to be Satoshi, as the creator is known in the world of Bitcoin, no one has been confirmed as the real Satoshi, and the search has gone on.
Satoshi created the original rules of the Bitcoin network and then released the software to the world in 2009. Satoshi largely disappeared from view two years later. Anyone can download and use the software, and Satoshi now has no more control over the network than anyone else using the software.
What Is Bitcoin, and How Does It Work? – The New York Times
Bitcoin fell by another $300 on Tuesday after the fallout of a Chinese ban on cryptocurrency crowdfunding methods saw the price of the digital coin slump earlier this week.
The virtual currency fell from $4,584 to $4,350 on Monday following the announcement of a regulatory clampdown on initial coin offerings (ICOs). Many start-ups rely on ICOs as a means to raise funds by selling off new digital tokens to the market. Total ICO investments peaked above $1.2 billion this year.
Although analysts contend that the price of bitcoin shouldn’t necessarily be linked with China’s ICO crackdown, the cryptocurrency hit a low of $4,037 on Tuesday, according to Coindesk’s price index. This follows an all-time high of more than $5,000 over the weekend, meaning the currency fell by almost 20 percent in the space of a few days.
“The price action has certainly been led by this Chinese salvo – but healthy profits and moving traders to take gains off the table too until the panic calms,” Charles Hayter, chief executive and founder of digital currency comparison website CryptoCompare, told CNBC via email.
The bitcoin analyst said that the cryptocurrency crackdown was expected due to “irrational excesses” in the Chinese market.
“The Chinese market has been perhaps the most virulently exuberant in terms of its irrational excesses and across the world regulators are looking to gradually turn up the regulatory heat on this ICO phenomenon,” he added.
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Bitcoin dips another $300 after China’s cryptocurrency crackdown – CNBC
At least Beanie Babies have the alternative use for kids to play with. David Merkel
Safe to say the Aleph blogs David Merkel is not a fan of digital currencies.
In his latest bearish slam lobbed at bitcoin BTCUSD, +1.21% Where money goes to die, he explained why he believes most of the players in the crypto market will eventually disappear along with the fortunes of late-to-the-party speculators.
The lure of free money brings out the worst economic behavior in people, Merkel wrote. That goes double when people see others who they deem less competent than themselves seemingly making lots of money when they are not.
He says that digital currencies have three primary weaknesses: Theyve got no intrinsic value, cant be used to settle all debts public and private, and are less secure than insured bank deposits.
While bitcoin, as is typically the case these days, managed to shake off the declines brought on by an announced crypto crackdown in China, Merkel didnt back away from his grim outlook.
In fact, he gave China credit for trying to limit the emergence of new cryptos.
A good argument could be made that they all should be made illegal, he wrote in his blog post. Its almost like we let any promoter set up his own Madoff-like scheme, and sell them to speculators.
Of course, theres no shortage of fervent bitcoin backers whod quickly dismiss Merkels argument, like one crypto exec who recently said he sees bitcoin potentially reaching $250,000.
To get an idea of just how explosive the growth in cryptocurrencies has been, check out this chart from Visual Capitalist:
Sure, its certainly been an amazing ride for those getting in at the right time, but pain awaits those chasing similar returns, according to Merkel.
New asset classes that have never been through a failure cycle tend to produce the greatest amounts of panic when they finally fail. And, all asset classes eventually go through failure, he wrote. Ultimately, most of the cryptocurrencies will go out at zero. Dont say I didnt warn you.
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Why Beanie Babies make for a better investment than bitcoin – MarketWatch