Comment by ur-whale | Hacker News Reader

Comment by ur-whale | Hacker News Reader

Rather balanced article, but like many fails to mention one really important aspect of Bitcoin:

There is a IMO a very tangible market demand for a financial product that allows one to completely shield value from the myriad of value-eroding propositions that have been baked into the traditional financial system to essentially bleed you dry on a long enough timeline.

    - "management" fees
    - capital gain taxes
    - death taxes (inheritance taxes)
    - asset seizures (divorces, bankruptcy, random court decisions against you, Cyprus Bank Disaster [1], etc...)
    - inflation (govt mandated or otherwise)
    - etc ...

No such product exists today in traditional finance, and imo quite a bit of the demand for Bitcoin comes from there.

For example, many of the traditional way to shield your wealth (stock market, commodities, real-estate) fail to be prone to some of the events I list above.

You may not agree that Bitcoin solves all of the above, in which case please list something that gets as close.

The fact that some of the things listed above will be viewed by some as "morally reprehensible" is irrelevant to the conversation: moral or not, the demand still exists.

And for folks who look at Bitcoin for this (shielding wealth) the fact that Bitcoin has gone parabolic in the last 10 years is kind of a nice cherry on the cake.

Yes, if you decide to use BTC to shield value, you are taking a rather big risk (volatility, BTC could be hurt by govt cracking down on it, there will be a huge "event" when Tether finally implodes, etc ...).

But again, please list something that comes any closer to solving the problem.

The above is why I believe people who claim Bitcoin has no "intrinsic value" (a term I consider to be entirely meaningless) are wrong, even using their own definition of "intrinsic value".

[1] https://en.wikipedia.org/wiki/2012%E2%80%932013_Cypriot_fina...

> There is a IMO a very tangible market demand for a financial product that allows one to completely shield value from the myriad of value-eroding propositions that have been baked into the traditional financial system to essentially bleed you dry on a long enough timeline. - "management" fees - capital gain taxes - death taxes (inheritance taxes) - asset seizures (divorces, bankruptcy, random court decisions against you, Cyprus Bank Disaster [1], etc...) - inflation (govt mandated or otherwise) - etc ...

Bitcoin does not shield you from capital gains taxes [0] or asset seizures since it's classified as property by the government. At least not in the US.

0: https://www.cnbc.com/2021/02/19/do-you-owe-taxes-on-bitcoin....

>Bitcoin does not shield you from capital gains taxes [0] or asset seizures since it's classified as property by the government. At least not in the US.

It is my admittedly limited understanding of US tax law that - as long as you don't sell - you aren't getting taxed on gains (unrealized capital gains).

Should you then decide to use your coins to directly buy - say - a house in Japan: since no actual Yen-denominated price is ever involved in the transaction, how will the US government evaluated your realized capital gains?

Also: the US is but one place in the world. There are quite a few folks on this earth that aren't burdened with a US passport, and quite a few places that don't have capital gains on crypto sales.

> Also: the US is but one place in the world. There are quite a few folks on this earth that aren't burdened with a US passport, and quite a few places that don't have capital gains on crypto sales.

Many other countries are taxing bitcoin as well. In fact it's the rare exception (Google seems to indicate about a dozen) that doesn't tax bitcoin. Your original statement about bitcoin being a way of avoiding capital gains taxes is simply false for most people.

> It is my admittedly limited understanding of US tax law that - as long as you don't sell - you aren't getting taxed on gains (unrealized capital gains).

And of course capital gains only happen when you sell. That's why it's a gain (the difference between the sale price and purchase price). That's the same way selling stocks works too. You only pay the capital gains tax when you sell.

> Your original statement about bitcoin being a way of avoiding capital gains taxes is simply false for most people.

Only if they decide to sell.

Also, only if they're not willing to do what it takes (i.e. move to a jurisdiction with no taxes on realized cap. gains and toss the US passport out the window for something better).

Finally, you haven't addressed the "barter" case (trade BTC directly for goods). I'm sure the US has found a way to tax this on paper (the IRS seems to be the only functioning part of the US govt these days), the question of enforceability is a different one.

Likely the government will determine the value of the house, deem your disposition of the Bitcoin to be equivalent to that , convert to USD and send you a tax bill.

This is pretty common around the world: barter doesn't get around taxes (at least at large enough sums)

Purchases denominated in BTC are treated as realized gains or losses:

> cryptocurrency users must deal with capital gains and losses in addition to whatever sales taxes they might face at the point of sale.

> For example, let's imagine you bought $10 worth of Bitcoin two years ago and it has since appreciated to $100 in value. If you sold it on an exchange, you'd have $90 of realized long-term capital gains, just like you would with any other capital asset.

> If you instead used that same $100 worth of Bitcoin to buy groceries from the supermarket, you'd still have to pay long-term capital gains taxes on the $90 difference between appreciated value and your cost basis.

https://www.kiplinger.com/taxes/capital-gains-tax/603117/how...

> If the fair market value of property received in exchange for virtual currency exceeds the taxpayer’s adjusted basis of the virtual currency, the taxpayer has taxable gain. The taxpayer has a loss if the fair market value of the property received is less than the adjusted basis of the virtual currency.

https://www.irs.gov/pub/irs-drop/n-14-21.pdf

How does the "capital gain" get calculated if you directly barter Bitcoin for goods, say to buy a used car whose price was never listed?

[EDIT]: never mind someone answered this above with the whole doctrine of "fair market value".

Some of the items you listed apply to crypto assets just like regular assets. It’s just the enforcement of the laws hasn’t been as consistent as with other physical financial assets.

Specifically:

“ - capital gain taxes - death taxes (inheritance taxes) - asset seizures (divorces, bankruptcy, random court decisions against you, Cyprus Bank Disaster [1], etc...)”

And

> The fact that some of the things listed above will be viewed by some as "morally reprehensible" is irrelevant to the conversation: moral or not, the demand still exists.

Isn’t it more a legal issue than moral? Evading tax is a criminal matter I thought.

> Evading tax is a criminal matter I thought.

In the US it is.

Other, more humane jurisdictions view it as an infraction: if caught, you'll get fined, but you won't go to jail.

Such as? UK, NZ, CA, US, AU all at a quick check consider tax evasion a crime (not just a civil infraction).

> UK, NZ, CA, US, AU

You mean the anglo world?

Their laws all look the same. That doesn't make them moral or right.

To answer your question, I am not 100% certain, but I believe CH falls in the category I describe.

CH has criminal prosecutions for tax fraud too.

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