Happy Thursday to you, readers. Have you been following the crypto markets much this week? Have you made a steadfast decision on whether it is time to get back into the market or not? Don’t worry if you’re not – every day there’s literally hundreds of potential profit-making opportunities to be capitalized upon – and we’re here to provide you with a mix of pertinent information and insider scoops to help make your experience with cryptocurrency a better one. Today we discuss why bitcoin is correlated with the stock market, why Wall Street’s appetite for risk matters to BTC, and the current state of tax regulations concerning bitcoin around the globe.

Stocks, BTC, Top Alts Rise in Unison

The price of BTC surged past the $10k mark early this morning on heavy volume, mirroring movement in the stock markets, where the major indices were up over 1% through the latter half of the trading day. Bitcoin’s comeback is being described as “inevitable” by blockchain consulting executives, who are keen to point out that similar downfalls in the price of BTC are always overcome by triumphant surges and new price highs, which is where bitcoin may well now be headed. The S&P 500 stock index had been down some 6% in a matter of days – near corrective territory – before pulling about-face late last week. Wall Street media outlets remain quick to note that in spite of the relative tumult in stocks, the economy remains strong, which is ultimately a rewarding factor in a bull market.

Litecoin (LTC), which had been in a slump since reaching an all-time high of $368 on December 19th, climbed 28% in less than 24 hours time to break the $200 mark for the first time in 30 days. Often referred to as the first altcoin, Litecoin had reached a low of $114 earlier in the month. Its market cap remains at a little over half of its all-time high of $20 billion set back in December, even after the announcement of an imminent Litecoin Cash fork that holders would be rewarded with after launch.

Litecoin was not the only beneficiary of this latest influx of Wall Street funds: all of the top 5 coins by market cap (Litecoin currently sits in the #5 position) were up over 5% for the day. Out of a list of over 1000 traded coins, 16 of the top 30 by 24-hour gain had market caps of over $100 million, signifying Wall Street’s preference for coins that have a previously established history of doing well.

Risk Back On?

This apparent shift back into non-“risk averse” investments is certainly welcome news to the crypto investor community, who stand to profit from spectacular pumps that have made some long-time HODLers millionaires in the period of a few years to a few months. Noting the exponential rise and explosive growth of cryptocurrency over the last couple years, the CEO of bitcoin exchange Kraken agreed with CNBC that the total market cap of all coins would exceed $1 trillion by the end of 2018. This would require more than a doubling of the current total market cap of $450 billion, which is not unreasonable given last year’s 35-fold increase.

2017 total mkt cap

Some financial industry insiders remain wary of not only cryptocurrency markets but the global economy as a whole. The abandonment of “easy money” policies established as a remedy to the last recession by federal banks worldwide may further decrease risk appetite – a metric which can be measured by the amount of investor enthusiasm in “high-risk” investments like bitcoin and other cryptocurrencies. Irrespective of whether the price of BTC leads or follows the price of stock market averages, it certainly is along for the ride, largely bound to Wall Street in an unofficial marriage.

Crypto and Taxes

Tax prep company Credit Karma reported earlier this week that fewer than 100 out of 250,000 tax reports filed this year contained information on cryptocurrency trades. This statistically underwhelming fraction accounts for only 0.04% of IRS filings thus far for the 2017 tax year — what was arguably cryptocurrency’s greatest year. Tax managers are among the first to point out why this is an extraordinarily low figure, referring to statistics from this time last year and a month-old poll in which 57% of participants responded that they had traded cryptocurrencies within the last year. According to the IRS, bitcoin is defined as a property rather than a currency, and as such taxes on it are calculated using property tax structure. Fidelity Charitable, an independent charitable arm of the Fidelity investment bank, reported that $70 million in donations had been collected via bitcoin through 2017 – a number which has soared 10-fold since 2016 – in a more compelling sign that at least some big moneyed investors are aware of the guidance on federal taxes regarding cryptocurrencies.

In Japan, home of the currency that backs over 50% of all crypto/fiat trades, bitcoin is classified as “miscellaneous income,” and faces a tax of up to 55% on reported earnings, with the top amount reserved for those reporting annual earnings greater than 40 million yen, or $365,000. Japan’s comparatively high taxes are accentuated for the likes of bitcoin after the government realized the tremendous potential for revenue that is unique to their country.

BTC vol by currency 2 13

Trades with BTC by world currency (USDT = Tether).

In Arizona, legislators have introduced a bill that would allow its residents to pay for state income taxes by using a “payment gateway,” specifically mentioning bitcoin, Litecoin as well as  “any other cryptocurrency recognized by the state”. The bill has so far proved popular among the Arizona state senate and will be introduced to the state house later next week. State Representative Jeff Weninger, co-sponsor of the bill, told Fox News that the measure was part of a plan to not only incentivize would-be taxpayers but to also put Arizona at the forefront of blockchain technology application, in hopes of drawing a tech-savvy workforce to the state.

Also in the News

  • The EU took a step back in its role of offering guidance on the law of cryptocurrency on Wednesday, as the president of the European Central Bank said it was not their job to regulate bitcoin, though they would continue to warn against the risks of cryptocurrency investments and trading. Decisions regarding regulation and taxation of digital currencies will therefore be left up to the individual countries that form the European Union.
  • Zealous demand for high-power graphics cards created by GPU miners is starting to wear on another serious customer base: SETI researchers. In addition to alienating the gamer community, cryptocurrency mining is now being blamed for hindering the search for extraterrestrial life. High end graphics cards can perform millions of calculations per second, making them the equipment of choice for miners of coins whose PoW hashing algorithm is GPU friendly. The average price per graphics card used for space research purposes has doubled in the last 3 months, putting them out of reach of fixed-budget research programs like SETI.