[Daily Discussion] - Friday, April 23, 2021 Bitcoin Markets |
- [Daily Discussion] - Friday, April 23, 2021
- US Capital Gains Tax Hike Could Redefine Portfolio Management
- Sentiment on investing in Bitcoin at these high price points.
- Crypto sniping bot needed for binance smart chain
| [Daily Discussion] - Friday, April 23, 2021 Posted: 22 Apr 2021 09:00 PM PDT Thread topics include, but are not limited to:
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| US Capital Gains Tax Hike Could Redefine Portfolio Management Posted: 22 Apr 2021 11:36 PM PDT The big story yesterday was the proposed change in capital gains tax in the United States. This narrative suggests that there may be a window for those with big gains on paper to sell their shares for the legacy tax rate for the remainder of this tax year. There's also a chance that the tax level would be retroactively applied, although this would appear less likely and also less interesting. Let's assume the capital gains tax does increase starting in 2022. What happens in that situation? Well, anyone who is holding a very large capital gain (only affects marginal rate beyond first 1M gain per year) will now be incentivized to crystalize their gain and pay the lower tax rate in 2021. American Cryptocurrency Ownership Yes, there are likely many American citizens with sizeable crypto gains who will be motivated to sell their crypto and lock in the lower tax rate. That puts an initial downward pressure. Most of the $1.8T in global crypto market was created in 2021, so we're talking about potentially $1-1.5T+ in unrealized gains across the industry. Let's also remember, with Bitcoin especially, a certain amount of coins are completely dormant / inaccessible. https://fortune.com/2017/11/25/lost-bitcoins/ This article estimated between 2.78M - 3.79M BTC are completely inaccessible. This would represent 15-20% of the total supply, or $138-$185 Billion worth of market cap on Bitcoin alone. This brings the total global market cap closer to $1.6T as of this writing. And it doesn't account for lost coins on any other projects. The effective unrealized gains of the crypto industry is likely closer to $1T. How much of that is in the hands of American citizens with millions in unrealized gains? I'm sure it's a reasonable amount, but very hard to say. If we look at crypto exchange volumes, Binance (non-US) has $61B in 24h volume, Coinbase has $7.5B. As a percentage of the industry, I think it's fair to estimate that somewhere between 10-15% of crypto assets are held by American citizens. This would represent taxable gains of $100-150B for US citizens. American Equity Ownership But what about the Americans who have no cryptocurrency? A lot of institutions, big investors, will face a similar situation with equities. The US equities markets are massive. We're talking nearly $50T market cap. And unlike the crypto markets, the US owns a lot of US equities. A LOT. https://www.taxpolicycenter.org/taxvox/who-owns-us-stock-foreigners-and-rich-americans This article estimates that Americans owned about 60% of US equities in 2019. About 25% of US equities were in US taxable accounts. Americans also own plenty of other assets, including foreign equities, real estate, precious metals, etc. All told, we're probably talking about $10T+, possibly even $20T+ in capital gains that could be subject to this rate increase. What does this mean? Well, potentially, it means that $10-20T in capital gains could be sold to lock in the legacy capital gains rate. The underlying value of these assets could be $30-40T. Of this amount, maybe $100-150B is cryptocurrency. The Real Takeaways are:
What are the Implications? Taking all the above information into consideration, we would expect to see trillions in asset sales from US citizens to avoid the new capital gains rate. We would expect the overwhelming majority of assets sold to be non-crypto. When including precious metals and real estate, we can assume crypto assets represent well below 1% in unrealized capital gains in US taxable accounts. The Great Rebalancing? When selling an asset to lock in capital gains, one stipulation is that you cannot repurchase the same asset within 30 days. This means we'd have trillions of dollars floating around looking to rebalance or reposition. It would be conceivable that this new influx of capital could find its way into the cryptocurrency markets. This may be a unique moment where large-scale investors re-examine their portfolio allocations and make big changes. After all, they have a ton of capital to deploy. It would appear to be very conceivable that these asset managers would be open to allocating capital to crypto which had been tied up in traditional assets. This capital gains tax has the potential to redefine portfolio management and asset allocation. It's easy to ignore cryptocurrency when your money is sitting in Google stock that has 10X'ed. It's harder to do so when you are forced to sell said stock and now have to allocate that capital somewhere else. TL;DR - This capital gains tax could result in trillions of dollars being rebalanced and could potentially redefine portfolio management for the modern ages. This could be the first time in history where professional large-scale asset managers seriously consider cryptocurrency as a viable and investable asset class. [link] [comments]  |
| Sentiment on investing in Bitcoin at these high price points. Posted: 23 Apr 2021 08:49 AM PDT Howdy. I sold my bitcoin at various levels at around $17k and again at $30k. I was able to double my money both times. Now that its trading at $50k plus, the price would have to now get to 100k to double my investment. I think a lot of people, myself included, feel like I could get better returns on the stock market. I'm curious what others think about this outlook. [link] [comments]  |
| Crypto sniping bot needed for binance smart chain Posted: 22 Apr 2021 05:37 PM PDT A few days ago I saw a message in a crypto group from a developer who made a sniping bot and wanted to partner with someone who could identify fundamentally sound projects. I consider myself a good researcher, so I started seeing what we could offer each other. He said he coded a bot that could identify when liquidity is provided to a token as long as he has the contract address. In the course of our discussion, I found out he's quite a disagreeable person. I played nice for a little because money, but he's just way too rude for me to partner with. He also said he would have to constantly update the code "24/7" which I think suspect isn't true. He said that while I would be researching all day, he would be tweaking the code. Anyway, if someone can point me in the right direction or make the bot yourself and share it, I'd be happy to share the backtested strategy. [link] [comments]  |
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