The Cryptocurrency Thread 2

[oldie]

Holding pure bitcoin on your own wallet poses some risk of losing your keys etc. Keeping pure bitcoin on an exchange is actually holding an IOU from the exchange for some bitcoin.

But the risk is the same, it is just transferred to exchange. And while an exchange may have better security than a user, they are also a more attractive attack target for hackers - indeed there were cases where cryptocurrency was stolen from exchanges.

With a bitcoin ETF, you can hold it in your brokerage account and you can buy and sell options on the ETF.

You can do this with actual bitcoin. Same as with oil, gold etc.

You can also hold the ETF in a retirement account to defer or avoid capital gain taxes.

Too volatile, so regulators aren't likely to permit it. Even now none of "speculative" ETFs are available in most 401k trading accounts.

 

[captain3d]

I would prefer to buy a Bitcoin ETF inside my retirement accounts.

It is frankly terrifying to move actual Bitcoin from an exchange to a private wallet even though I have done it many times. One mistake and it is gone forever. Retail investors will never get past this.

Also for estate planning the wife would find it much easier to deal with an ETF or exchange before a Ledger, passwords and transfers.

 

[oldie]

IMHO retail investors ("buy and let it grow") should not be investing in crypto; crypto coins are more like penny stocks and FOREX, you make money on volatility, not on growth.

This is also why I don't expect the institutions to allow crypto in retirement accounts. Mine don't even allow leveraged ETFs.

 

[captain3d]

I already hold GBTC and ETHE in my retirement accounts at TDAmeritrade. I would prefer not to be paying a 2% annual fee but at least they are at a discount to spot by -15% to -20% right now.

Leveraged ETFs also available like TMF or UPRO

With crypto’s volatility and its status as property from a tax point of view it is great for tax loss harvesting if held in a taxable account.

I was successful last year buying crypto high and selling low in taxable then buying low and selling high in retirement accounts. All the time maintaining a constant allocation of crypto, making over all gains and booking tax losses thanks to no wash sale rule.

Sadly I switched to retirement around $48k BTC and have to wait it out until I can swap back at a higher price. Could be a long wait.

 

[oldie]

You're lucky. None of the 401k/IRA I have (Fidelity, etrade, vanguard) allow even leveraged ETFs.


Unsure whether or not what you describe is a wash sale. But you can do the same with commodities (which are also property and volatile).

 

[tothemoon]

I already hold GBTC and ETHE in my retirement accounts at TDAmeritrade. I would prefer not to be paying a 2% annual fee but at least they are at a discount to spot by -15% to -20% right now.

Leveraged ETFs also available like TMF or UPRO

With crypto’s volatility and its status as property from a tax point of view it is great for tax loss harvesting if held in a taxable account.

I was successful last year buying crypto high and selling low in taxable then buying low and selling high in retirement accounts. All the time maintaining a constant allocation of crypto, making over all gains and booking tax losses thanks to no wash sale rule.

Sadly I switched to retirement around $48k BTC and have to wait it out until I can swap back at a higher price. Could be a long wait.

i don't understand the draw of things like GBTC. why not just buy it directly and avoid all those fees? if you care about tax loss harvesting, crypto's in a gray area such that wash sales don't apply to it.

 

[joesxm3]

With crypto’s volatility and its status as property from a tax point of view it is great for tax loss harvesting if held in a taxable account.

I was successful last year buying crypto high and selling low in taxable then buying low and selling high in retirement accounts. All the time maintaining a constant allocation of crypto, making over all gains and booking tax losses thanks to no wash sale rule.

When you say crypto in taxable account, do you mean something like coinbase or wallet, or are you saying you buy GBTC in a taxable brokerage account?

If GBTC in taxable brokerage account, am I missing something regarding the wash sale rule treatment? I assumed that GBTC would be subject to the normal equity wash sale rules and capital gain tax rates?

 

[oldie]

I assumed that GBTC would be subject to the normal equity wash sale rules and capital gain tax rates?

I'm also very skeptical this would pass IRS audit. If you sell gold for loss (taxable) and buy gold ETF in retirement, its pretty much the same.

 

[captain3d]

I buy GBTC and ETHE in my TDAmeritrade retirement account and sell it at a higher price ( hopefully). No taxes in that account of course.

Then I buy real BTC and ETH at Coinbase high and hope to sell it low (sounds funny)

Then back to TD again.

No wash sale problems if I did it all at Coinbase but I am trying to capture gains in retirement tax free and losses in taxible.

It has been kind of fun. My Coinbase history looks like the worst trader ever [emoji3]

 

[Markola]

IMHO retail investors ("buy and let it grow") should not be investing in crypto; crypto coins are more like penny stocks and FOREX, you make money on volatility, not on growth.

I am betting this opinion doesn’t apply to Bitcoin. I plan to hold it for at least a decade.

 

[captain3d]

I consider myself a serious ‘hobbyist’ retail investor with a long term buy and hold approach to crypto as part of normal diversification. VTI, TLT etc

I consider crypto as part of the future and would love a low cost US ETF similar to those available in other countries.

I am hoping GBTC gets the conversion to ETF this year reducing fees and eliminating the -20% discount which would be a nice value boost.

 

[oldie]

I consider myself a serious ‘hobbyist’ retail investor with a long term buy and hold approach to crypto as part of normal diversification. VTI, TLT etc
I consider crypto as part of the future and would love a low cost US ETF similar to those available in other countries.

I'm confused now.
1. Diversification value: does crypto really move differently from regular securities (stocks/bonds) when market conditions change?
2. What makes you think it is part of the future? To me its value is purely speculative, i.e. it's more like gold. But gold at least can be used to make a ring - there are indeed people who buy gold because they need gold, while nobody buys Bitcoin because they need Bitcoin - everyone buys it to resell it to someone else, with hope to make a profit.

 

[captain3d]

I have rental property, stocks, bonds, gold, cash and crypto.

I think they all will be part of my future. I see crypto partly like a super speculative tech stock (ETH) and also a speculative gold alternative (BTC)

If future financial services run on crypto it will be worth a lot.

Nothing too complex in my approach.

 

[target2019]

I suggest that future financial services will involve something like blockchain technology.

The core currency component will be crypto put in place by each gov't.

As today there will be a lead currency. My guess it that it won't be something credited to an anonymous person, like BTC.

 

[tothemoon]

I suggest that future financial services will involve something like blockchain technology.

The core currency component will be crypto put in place by each gov't.

As today there will be a lead currency. My guess it that it won't be something credited to an anonymous person, like BTC.

that's an interesting thought experiment, if every country creates their own blockchain for their currency.

 

[Markola]

BTC price nudged down again this am, making it essentially flat for the last year. I looked back and only see two Jan-Jan periods when Bitcoin was down, and it was way down. The other 8 were WAY up. People who try to predict Bitcoin prices short term often don’t come out looking so good, eg virtually all the podcasters I consume who confidently predicted $100,000 by the end of 2021. I’m only interested in the 5-10 year future prices and bet on 10-20x or more as global adoption widens.

For fun, any guesses on January 2023 Bitcoin price? We haven’t seen two back to back blah Jan-Jan periods. I’ll bet $80,000.

 

[target2019]

They say your 1st guess is the best.

Since BTC etc. is correlating with VT more and more, I predict it will be negative for the year, just like the growth component of S&P500. Revealing my pessimistic personality, it will be -25% for the year, both BTC and VTI.

 

[aja8888]

that's an interesting thought experiment, if every country creates their own blockchain for their currency.

Blockchain is just a software platform.

 

[freedom2022]

Does the bitcoin drop due to internet shutdown in Kazakhstan or the Fed?
If it is due to the situation in Kazakhstan, then it will stabilize because people willing to mine more to earn quick bucks.
However, if it is due the Fed raising interest rate, then it will go down more since there are three or more rate increases this year alone.

 

[captain3d]

Well if we knew we would be richer.

 

[Markola]

2. What makes you think it is part of the future? To me its value is purely speculative, i.e. it's more like gold. But gold at least can be used to make a ring - there are indeed people who buy gold because they need gold, while nobody buys Bitcoin because they need Bitcoin - everyone buys it to resell it to someone else, with hope to make a profit.

A better analogy for Bitcoin might be land on the island of Manhattan, as there is a finite number of parcels and developers are building aggressively on top of it.

Regardless of the imperfect analogy available for a brand new asset class, there actually is a need for such a “digital property” in an inflationary world in which most governments, including ours, repeatedly flood the markets with cash to stave off recession. Much of that new cash has flowed into securities of all kinds, which are overbought and at nosebleed prices, and home prices are through the roof, due to record low interest rates set by central banks. Meanwhile, Bitcoin is being created at a slow, controlled rate, not subject to any central bank or dictator. No single entity runs it and its vast, global ecosystem of nodes, miners and holders can’t feasibly be stopped or changed at this point. Unlike other crypto and fiat currencies, Bitcoin is an ice cube that can’t really melt or disappear, which is what is so appealing to investors ranging from hedge funds to Millennials to immigrants sending remittances back home. 99% of people seem to poo-poo such a disruptive, early-stage technology but I see a moat forming around Bitcoin, specifically, and am paying rapt attention. YMMV.

 

[target2019]

A better analogy for Bitcoin might be land on the island of Manhattan, as there is a finite number of parcels and developers are building aggressively on top of it.

Regardless of the imperfect analogy available for a brand new asset class, there actually is a need for such a “digital property” in an inflationary world in which most governments, including ours, repeatedly flood the markets with cash to stave off recession. Much of that new cash has flowed into securities of all kinds, which are overbought and at nosebleed prices, and home prices are through the roof, due to record low interest rates set by central banks. Meanwhile, Bitcoin is being created at a slow, controlled rate, not subject to any central bank or dictator. No single entity runs it and its vast, global ecosystem of nodes, miners and holders can’t feasibly be stopped or changed at this point. Unlike other crypto and fiat currencies, Bitcoin is an ice cube that can’t really melt or disappear, which is what is so appealing to investors ranging from hedge funds to Millennials to immigrants sending remittances back home. 99% of people seem to poo-poo such a disruptive, early-stage technology but I see a moat forming around Bitcoin, specifically, and am paying rapt attention. YMMV.

Yes, Manhattan is a perfect example. I believe there are also downside risks with Manhattan property. The environment the island sits in is changing. Nothing is forever, and ice cubes melt. Even if a meltless cube is invented, there is no guarantee that access to the ice cube is guaranteed. YMMV.

 

[joesxm3]

If you like the Manhattan anology, then perhaps Decentralland (MANA) would be a more direct play. It sells virtual real estate in the metaverse.

 

[Markola]

^^^^^. Ha, my mind = blown.

I’m about 3/4 of the way through the Alden article that Sand101 linked in post #33. The way she explains crypto history makes me queasy about any coin, token, NFT or network that is not called Bitcoin. Bitcoin has survived massive attacks, blockchain wars and forks and has now reached an adoption scale that is probably impervious.

She confirms Michael Saylor’s analogy that Bitcoin is a proven, one-celled kind of simple plankton in a sea of evolving, colliding invertebrates at war with each other for reproduction and survival. Even Ethereum can’t seem to settle on its DNA, risking being gobbled up by faster Solana or Cardano, which are unproven and are subject to all sorts of vulnerabilities themselves. Those are all currencies and securities, while Bitcoin is distinctly a simple digital property.

 

[Markola]

PS. If you want to feel better about coming to the Bitcoin party too late, read Dr. Paul Krugman’s new opinion piece in the NYT, and the reader comments. The derision and ignorance displayed by intelligent people reflect just how we still might be not only in early innings but in spring training.

…And yet Dr. Krugman’s world view is threatened enough for him to write about it. Bitcoin doesn’t care, though. It just sits there, while more and more people buy and hold a piece.