A review of people who prophasized on BTC prices but have completely missed the mark
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A review of people who prophasized on BTC prices but have completely missed the mark
Wells Fargo analyst Mike Mayo predicts that technology will enable efficiency for banks this decade
Chrome extension ‘Shitcoin Wallet’ is injecting malicious javascript to steal user data
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The year is coming to an end, and a lot of people have started thinking about minimizing their tax burden. If you’re a bitcoin investor, things get even more complex. The IRS recently sent out 10,000 letters to cryptocurrency investors, and this is an indication of how serious they are when it comes to cryptocurrency tax compliance. This means that bitcoin investors need to make doubly sure that they’re filing their returns as accurately as possible. At the same time, they also need to find legitimate ways of minimizing their bitcoin taxes.
Let’s look at some things you can do to save your precious gains in April.
This is one of the best loopholes in current crypto regulation that you can leverage to reduce your tax burden. Let’s say you’ve made significant profits from crypto trades through the year. However, the current value of the bitcoin you hold is extremely low. You can simply sell your current bitcoin holdings at this low price. This will trigger capital losses that you can then set off against your profits. In fact, you can even use these losses to offset future gains and ordinary income (up to $3,000).
But what if you want to keep holding onto your bitcoin in the hope of future appreciation? Well, if you are based in the U.S. then you can simply buy it back afterward.
Note that some countries use Wash-Sale rules that prevent re-buying sold assets right away. For example, in Canada, a special Superficial Loss Rule kicks in whenever you sell at a loss — essentially preventing you from reducing your crypto taxes if you buy the assets back within 30 days. There is a similar rule in the U.K. as well. However, since the U.S. treats crypto as property, the Wash-Sale rule that applies to tax-loss harvesting in securities doesn’t apply to crypto.
You may have noticed that, at the time of publication, bitcoin is trading at fairly low prices, and many believe this might be because big investors are leveraging tax-loss harvesting and selling their holdings. So, if you are sitting with unrealized losses, now could be a good time to sell.
One of the biggest reasons why people tend to overpay crypto tax is that they don’t have accurate records of their trades. Given that crypto investors can do hundreds of trades in a year, record-keeping can be quite a chore. This becomes more complex because exchanges don’t necessarily keep records for everyone. For instance, Coinbase only issues a tax form statement to users who have realized gains in excess of $20,000 and undertaken more than 200 transactions.
Many exchanges do allow you to download your transaction files, though, and people generally rely on these to do their bitcoin taxes. However, if you are not careful you could easily end up overpaying. Here are two of the most common mistakes that people tend to make:
First, there may be some transactions that are simply a transfer of cryptocurrencies from one wallet to another; but if you miss out on this, they may appear to be two separate transactions — and you will end up paying double the tax.
Let’s say you buy 1 BTC for $7,000 on Binance and later move the funds to your private BTC wallet. A few days later, you transfer the BTC from your private wallet to your Coinbase account and sell it for $7,200. So this is just one transaction, with capital gains amounting to $200. However, if you have not kept records clearly, your accountant may get confused during tax season and look at the two transactions as distinct from each other. As a result, you could end up paying taxes first on the withdrawal from Binance and again when you sell the assets on Coinbase.
Sometimes it becomes difficult to identify the cost of the cryptocurrency that you are selling. Without an accurate cost basis, you won’t be able to deduct the cost of acquiring an asset from the sale price. As per the IRS’s latest guidelines, you are now able to use both Specific Identification as well as FIFO (First In First Out) to calculate cost basis.
If you have records of your purchases and know the cost basis for the holdings in your different wallets, then you can make tax-efficient sales by selling coins with a high cost basis first. However, if you have no idea how much you bought the coins for, then you will just have to apply the FIFO rule which gives you no control over the cost basis and could result in higher taxes.
There’s still time to get on track before the year ends. Get your records in order and sell your holdings to leverage tax-loss harvesting — you’ll find that your end-of-season tax bill is a lot less steep than you expected. If you’re feeling overwhelmed and need expert help, consulting with a CPA who understands cryptocurrencies and bitcoin taxes might also be a good idea.
This is an op ed by Robin Singh. Views expressed are his own and do not necessarily reflect those of Bitcoin Magazine or BTC Inc. This article is for information purposes only and should not be construed as tax advice. Consult with a tax professional to assess your own individual tax requirements.
The post The Taxman Is After Your Bitcoin: Harvest Your Losses Before It’s Too Late appeared first on Bitcoin Magazine.

2019 has been a bit of a rollercoaster ride for those in the crypto sphere, and one thing that is on the mind of many is the upcoming Ethereum fork in January. As everyone knows, a hard fork is one of the most crucial events in the lifetime of any cryptocurrency, and when it happens to be the world’s second-biggest cryptocurrency, then there is going to be a lot of anticipation.
Key DetailsThe reason behind choosing to do a hard fork on January 1 is a bit ignominious for the people behind the network.
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A French tech entrepreneur allegedly stole over 1 million euros in Bitcoin from his former colleagues in a reported “act of revenge”
Bitcoin Magazine is proud to be the longest running source for Bitcoin information; but we couldn’t do it without contributions from the Bitcoin community itself.
This past year alone, more than 30 knowledgeable and passionate Bitcoin enthusiasts of different backgrounds and areas of expertise have published opinion pieces with Bitcoin Magazine. Our readers have benefited from their insightful articles on a wide variety of topics.
Below is a list of op eds from 2019 — check out the ones you might have missed or reread a few favorites. Perhaps you’ll be inspired to write one of your own. Bitcoin Magazine strives to reflect the viewpoints of the Bitcoin community as a whole and welcomes contributions from our diverse readership.
Brekkie Von Bitcoin: Op Ed: Pitching Bitcoin During the Holidays
Alexandre Lourimi: Op Ed: Tendencies and Opportunities of Bitcoin Taxation in the EU
Andrew Mount: Op Ed: U.S. Cryptocurrency Regulation Faces Uncertainty in 2020
Flex Yang: Op Ed: Waiting for Bitcoin Spring and the Next Bull Market
Robin Singh: Op Ed: IRS Doesn’t Get Cryptocurrencies: Here’s Why
Yehuda Lindell: Op Ed: Quantum Computing, Crypto Agility and Future Readiness
Ruaridh O’Donnell: Op Ed: Bringing DeFi to Bitcoin Opens Up New Frontiers
Sasha Hodder: Op Ed: The IRS Is Checking Up on Crypto Businesses. Is Yours Ready for Its Title 31 Exam?
Michael Folkson: Op Ed: Want to Learn About Bitcoin? Try Contributing a Transcript
Phil Chen: Op Ed: Bitcoin Is the Key to Ethical AI
Maciej Cepnik: Op Ed: HODLing Bitcoin? Cold Storage Is Worth the Extra Effort
Joshua Scigala: Op Ed: Equity Funding Is Still a Good Old-Fashioned Way to Raise Capital
Alex Gladstein: Op Ed: In China, It’s Blockchain and Tyranny vs Bitcoin and Freedom
Alex Mashinsky: Op Ed: In the Battle Between Libra and a Digital Dollar, Bitcoin Will Win
José Niño: Op Ed: Why Argentina Needs Bitcoin
Kyle Torpey: Op Ed: Stablecoins Report Illustrates That G7 Leaders Don’t Understand Bitcoin
Alon Muroch: Op Ed: How to Understand Taxable Events for Cryptocurrency
Giacomo Zucco: Discovering Bitcoin: A Brief Overview From Cavemen to the Lightning Network (series of 7 articles)
Mati Greenspan: Op Ed: Wall St. May Support Bitcoin Adoption, But Markets of Unrest Are Key
Bryan Jacoutot: Op Ed: Bitcoin Compensation Compliance: Navigating Murky Waters
Peter C. Earle: Op Ed: Bitcoin and the Dawn of the Negative Interest Rate Era
Michael Soussan and Jeremy Nau: Op Ed: The Bitcoin Lightning Network Adds a New Set of Accounting Challenges
David Kemmerer: Op Ed: Are You Paying Taxes on Your 2019 Bitcoin Gains?
Nozomi Hayase: Op Ed: Bitcoin, Native Currency of the Internet, Restores the Law of Nature
Cole Walton: Op Ed: Why Bitcoin Is Still the Most Valuable Cryptocurrency
Eric Jansen: Op Ed: How to Hedge Your Digital Asset Portfolio Using Bitcoin Futures
Marco Streng: Op Ed: Why We Shouldn’t Worry About Crypto Mining Energy Consumption
Steven Weru: Op Ed: Bitcoin in Africa, What Needs to Be Done to Encourage Adoption?
Taylor Pearson: Op Ed: How Fiat Could Fall and Bitcoin Could Soar
John Carvalho: Op Ed: Lightning Network Consensus Is a Marketplace and That’s Okay!
Ajeet Khurana: Op Ed: 3 Reasons Why Crypto Has an Exchange Problem
Andrei Poliakov: Op Ed: We Just Launched the First Cryptocurrency-to-Tax Payment Partnership
Jameson Lopp: Op Ed: How Many Wrongs Make a Wright?
Michael Ou: Op Ed: Hanging Money Launderers Out to Dry: The Role of KYC/AML in Blockchain
Paul Puey: Op Ed: Defining Decentralization: How Ambiguity Continues to Divide Crypto
Paul Walsh: Op Ed: Why It’s Unsafe to Store Private Crypto Keys in the Cloud
Jimmy Song: Op Ed: Bitcoin Mining Attacks Are Overblown
Got something to say? Share your views by submitting a pitch to Bitcoin Magazine here.
The post At Bitcoin Magazine, Views Expressed Can Be Your Own appeared first on Bitcoin Magazine.
New Year’s resolutions are common for us all, but what could Bitcoin’s resolutions be like for 2020?
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(Image credit: Saul Gravy/Getty Images/Ikon Images)
For almost a decade, Bitcoiners from all across the world have celebrated January 3 as Bitcoin’s bonafide birthday. It was on that date in 2009 that Satoshi Nakamoto mined Bitcoin’s genesis block and it was this first successful hash computation that defined the political purpose of Bitcoin with the embedded message: “The Times 03/Jan/2009 Chancellor on Brink of Second Bailout for Banks.”
Simply put, Bitcoin is an instrument that is specifically designed to resist the inflationary urges of monetary politics, and its qualities empower individuals to become sovereign. However, the business sector that developed and blossomed around Bitcoin has not always remained true to the cypherpunk origins that created it; Often times, exchanges and lending services impose withdrawal limits, freeze accounts and find other ways to arbitrarily restrict users’ access to their funds.
Long-time Bitcoiner Trace Mayer has observed how these businesses tend to restrict the concept of sovereignty that the technology was meant to protect, and his response to the phenomenon is the Proof of Keys event, held every year on January 3 to remind bitcoin holders of the ethos behind the technology.
During the “celebration,” as it’s described on the official website, participants seize back their bitcoin from any third parties they usually trust on their behalf.
“I started Proof of Keys as a celebration of our monetary sovereignty,” Mayer told Bitcoin Magazine in a recent interview. “If you have rights but never flex them, your muscles will get weak. With Proof of Keys, we just withdraw all of our crypto from any third party — be it exchange or lending platform. You withdraw to a node that you’re running (so you do your own validation without relying on somebody else) and you hold your own private keys.”
The event speaks to Mayer’s own noteworthy commitment to Bitcoin’s most cypherpunk ideals, including distrust of third parties, the utmost privacy and security and a relentless emphasis on taking every precaution available to retain control of his bitcoin.
Going a step further for its emphasis on sovereignty, Proof of Keys makes a point to remind bitcoiners of instances when exchanges were hacked or other issues led users to irreversibly lose their funds — even if those bitcoiners haven’t experienced that themselves.
“We have so many people who come into the space and they didn’t lose money in Mt. Gox or other big exchange hacks that have happened over the years,” explained Mayer. “So they don’t necessarily have the ethos, experience and human capital to own their own keys. Proof of Keys is an annual event which helps everybody develop these skills and abilities. It will also help strengthen the network.”
Mayer, who has coined the term “HODLer of last resort” as a way of signalling individual sovereignty, has also expressed his concern over the increasing centralization of bitcoin ownership. In a recent tweet, he pointed out that almost 2,000 BTC are being kept in the custody of nine exchanges, and this trend of embracing trust in third parties is anathema to the philosophy and purpose of Bitcoin.
Proof of Keys acts as a test for exchanges to make sure that they have enough liquidity to handle massive withdrawals from participants and it also emphasizes an educational component. New Bitcoiners are encouraged to run their own nodes, learn proper key management and inherit the philosophical ideals of sovereignty.
“Proof of Keys is a celebration during which we exert our monetary sovereignty, we get to have a lot of fun, and we get to teach new people how to do it,” said Mayer. “It’s important to celebrate that we have this ability — because if we never exercise the ability or do it hazardously, we face the risk of taking exchange solvency for granted. You don’t want to learn and train yourself to become sovereign during a real emergency situation.”
In terms of hardware and software recommendations for individual sovereignty, Mayer is a big fan of general-purpose devices and Bitcoin Core. In his view, somebody who only owns small amounts of bitcoin should simply download and run Bitcoin Core, as it’s one of the most audited and tested pieces of software.
“Newbies in the space should run their own full node and take their cybersecurity very seriously,” he said. “If you deal with small amounts, then it’s recommended to use the Bitcoin Core software, as it’s a full node which allows you to hold your private keys. They built Core to be very secure and robust, and it’s free. As long as you have enough disk space on your computer, you can run it for free. Start from here, and withdraw a small amount to see how it works.”
For more advanced users who want even greater security, Mayer recommends the open-source cold storage bitcoin wallet Armory.
“Armory is like a Swiss Army knife: you can have multiple wallets, you can control the UTXOs on each one of them, and all of this is an upgrade in your ability to interact with the Bitcoin network,” he explained. “You can have your watch-only wallet on the new computer and a cold storage wallet on a computer that you never connect to the internet. Through this software, you don’t need to buy specialized hardware that leaks privacy.”
Other resources and protocols that Mayer endorses for custody and sovereignty are the Glacier protocol (a 90-page guide which explains best security practices) and Smart Custody by Christopher Allen.
Mayer’s recommendation for learning proper key management is practical. In his view, newcomers should approach Bitcoin just like a bicycle: By taking small, low-risk steps to learn and never feeling discouraged when failures happen.
“There is no substitute for getting on the bicycle and riding it,” Mayer said. “You might fall and scrape your knee — if it happens, just get up and get back on the bicycle. Start out small, as you have no business locating to bitcoin more capital than you’re ready to lose. And when you deal with third parties, remember that you will inevitably be disappointed and it will cost you money. The golden rule in Bitcoin says that you can’t trust these third parties: they become massive honeypots and there’s a lot of value to be stolen in terms of both assets and data. At least we have Proof of Keys to generate some discussion, otherwise most people remain ignorant. The price of being ignorant in the Bitcoin space is very expensive.”
Hardware bitcoin wallets are affordable devices that use cryptography and physical security features in order to provide a safer way of holding private keys. Yet in spite of their rising popularity and relative user friendliness, Mayer remains skeptical and critical.
“First of all, I don’t like bitcoin-specific hardware wallets like Ledgers and Trezors — you put a lot of trust in these companies,” he said. “They know that you’re going to be using that device for bitcoins, Amazon knows that it’s in your permanent purchase history, so think about it.”
Mayer’s main concern in regards to hardware wallets isn’t coin security but privacy. As he explains, “Ledger and Trezor can be uniquely identifiable through a serial number, and when they report back home they leak all types of information about your addresses, connection and transactions.”
If the hardware wallet manufacturers store information about how many bitcoin their clients are holding, they become honeypots for hackers and eventually threaten those who trust third parties with their financial security.
“Put on your criminal hat: If you want to figure out where you can find some bitcoins, you go compromise the databases of Ledger or Trezor, and simply go for the people whose devices hold most coins. It’s not very difficult,” argued Mayer.
In recent years, the concept of “financial sovereignty in a box” has become increasingly popular among newbies. Instead of synchronizing the Bitcoin blockchain on their computers and running complementary applications on top of it, some community members prefer to purchase dedicated plug-and-play hardware. However, Mayer is not a fan of these products due to the fact that users need to blindly trust in the good faith of the service providers.
“I don’t think that you need to spend money on a node,” he said. “I have several old computers and I run Bitcoin full nodes on them. In addition, I can run Bitcoin Core on any of my new computers too.”
As with hardware wallets, Mayer is concerned about leaving permanent trails in regards to interacting with the Bitcoin network (and potentially owning coins). In this regard, he recommends using generic multipurpose computers and hardware that nobody would suspect to be running Bitcoin.
“I like using general-purpose hardware because the sellers from whom I acquire it don’t necessarily know how I’m going to be using it. With a random number generator, it’s less likely to be compromised and it’s less likely that the person who sold it to me will know that I use it for Bitcoin,” said Mayer.
Mayer recommends that Bitcoiners choose their exchanges with great precaution and also review their privacy policies. While security is very important for traders, the way financial data gets handled is of equal importance.
“You need to be extremely careful with the exchanges that you use, the way that you interact with them and the data that you’re leaking to them,” Mayer said. “We must also remember that Bitcoin is an immutable blockchain and the transactions are there permanently. If you’re leaking data such as IP address, email address or passport scans and it gets attached to different bitcoin UTXOs, you’ve got to be careful and aware of the immutability. The data gets shared around with other companies in the space such as Coinbase, Bitstamp and Chainalysis, so precaution when signing up with your data is essential.”
Furthermore, Mayer presented an essential principle: Third parties can’t be trusted with too much data and the only bits of information that are truly safe from hackers are the ones that never get shared on the internet.
“I like to give to these exchanges and operators the least amount of information and the least amount of privilege. If you don’t give up the data in the first place, it can’t get hacked or spread around,” he said.
Lending services didn’t escape from Mayer’s scrutiny either, as the Bitcoiner has questioned their business models in relation to liquidity, solvency, data retention and commercialization.
“How can lending services pay 7 percent interest while charging only 6 percent for loans?” he asked. “It’s because they most likely also sell data, or don’t deal with their own money. When you demand back your bitcoins from the lending services, you’re going to find out whether they have them or not. When you withdraw your coins from exchanges, you also see if these companies are fair and solvent. This is very important information that you don’t learn until you enforce it.”
After attending most of Ross Ulbricht’s trial hearing, Mayer became aware of the U.S. government’s ability to trace transactions on the open Bitcoin ledger and differentiate between coins that have been used for criminal activities and “clean” ones. Consequently, he became very much aware of the importance of UTXO cleanliness and developed a habit of holding taint-free coins.
“I’m not really interested in engaging in CoinJoins because that only complicates the KYC/AML situation and I know that my bitcoins are clean,” he explained. “So why would I want to mix them with someone whose bitcoins are dirty? All of this KYC/AML data has effects on the fungibility of satoshis and you don’t want to become a person of interest in criminal investigations.”
Mayer also implied that anonymity on a very small scale is inefficient and easily breakable, and privacy should exist by default even for users who aren’t aware that they’re using it.
“I think that privacy and fungibility have to be there in the base layer for everybody,” Mayer explained. “Privacy can’t be opt-in — if three out of 100 people are wearing a mask, then it’s simpler to use scrutiny and figure out who the masked people are. But if everybody is wearing a mask, identification becomes more difficult.”
In regards to Confidential Transactions, Mayer suggested that the ability to audit the Bitcoin blockchain and guarantee the limited supply is more important than concealing transaction data.
“What is more important: having a limited supply or the privacy and fungibility?” he asked. “For the first network effect of speculation, I think having a limited amount is more important. In hindsight, I also think that the limited supply is more important for monetary sovereignty than privacy and fungibility. This doesn’t mean that privacy and fungibility aren’t important and it doesn’t mean that we shouldn’t try to take territory through them whenever we can.”
In order to incentivize Bitcoiners to withdraw their coins from exchanges through Proof of Keys, Mayer thinks it may be a good idea to airdrop special altcoins as a gift.
“I think having an airdrop for Proof of Keys participants would be great,” he said. “These events don’t cost the bitcoin holders anything and you get a new asset. And if these airdropped assets have any value at all, you can always sell them and get more BTC.”
Though he hasn’t fleshed out a complete plan for such an incentive, Mayer thinks that these airdrops can work in two ways: They reward users for withdrawing their coins, but also reward exchanges for proving that they hold all the required liquidity to operate. The resulting altcoin might acquire market valuation and help traders acquire more bitcoin.
“I haven’t put a ton of thought in this idea of having a Proof of Keys airdrop, but if we could use this concept to squeeze value out of the exchanges that don’t provide the keys, then that would be a way for us to perhaps even make some money,” Mayer explained. “The illiquid exchanges that can’t process all withdrawals won’t get the airdrop, so the scarce assets received by the good players can even be liabilities for the exchanges.”
In defense of noncontentious altcoins, Mayer said that they can serve two important purposes that support Bitcoin: They offer a testnet for Bitcoin features (as was the case of Litecoin with SegWit) and also raise the cost of blockchain analysis operations.
“If more coins exist, then Chainalysis must adapt to the magnitude of the market,” Mayer concluded. “We don’t know how profitable it is for them to spy on people at such a great scale, but we can increase the amount of work that they need to do so they can have greater costs.”
The post Video: Trace Mayer on Proof of Keys, Sovereignty and Bitcoin Privacy appeared first on Bitcoin Magazine.
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