I agree that some crypto folks may not have basic personal finance education (although some people investing in stocks, and promoting that to others, also do not have basic personal finance education). I also agree though that some cryptos basically print money (as one example, go look into the inflation rate of Curve DAO, a popular DeFi protocol, which I don't invest in, due to the inflation rate).
Bitcoin does not print money or have a high inflation rate, and that is the point of it (it was the original cryptocurrency that took off, so saying that the whole crypto sphere is bad is kind of like saying that because there is some bad software that all software is bad, or that because there is one stock that is bad that all stocks are bad). The max supply of Bitcoin is capped. I don't think that Bitcoin is the only digital asset worth investing in, but I also don't think it is valid to claim that all crypto is printing money, or that all crypto is bad.
I am a crypto fan. I don't think that it's the only way of storing wealth. I also invest in an S&P 500 index. I do think that crypto has a higher potential to beat inflation over time, with inflation currently at 5.4% [1], vs stocks. US stocks have been propped up by The Fed printing USD (which they can due to it being the world reserve currency, which may or may not last forever) and investing it into Wall Street, as well as dropping lending rates to essentially zero, since the March 2020 crash. The Fed has already signaled their intention to raise rates in the next few years, which would damper some of the bullishness of the stock market.
Crypto is a new asset class that investors can consider if they have some risk tolerance, with the potential for a high reward. The thing that I think a lot of people miss is that traditional finance is by no means perfect. There are negative interest rates in some parts of the world (i.e. see Europe). There have been synthetic assets in traditional finance like CDO's (i.e. see The Big Short), which are detached from reality (and assets like that will continue to be created because big money will continue to be bailed out). The current P/E ratios of even some popular stocks (i.e. TSLA) don't reflect traditional fundamentals, so there is a lot of speculation, just like with crypto (I don't think that speculation is bad, there are folks betting on what a company or a technology can become in the future). Also, the US Debt increases every year, with no signal that they will ever pay it back. Based on all this, I think it is worth considering some other asset classes to invest in vs purely traditional finance.
Anyway, just because crypto is not perfect and the space has many digital assets (and not everyone understands them), it doesn't mean that as a whole that it's bad and should be destroyed. There's so much already invested in the crypto space, and it's not just capital, it's startups and human time invested (like any other software project or field). People will continue down this path in one way or another. Regulation will likely mature the space and more people will feel comfortable to invest in it based on that. I think that crypto will at least exist alongside traditional finance, even if it does not completely transform it, and it's worth being open to seeing how this technology can benefit us all.
I thought the Wyden-Lummis-Toomey amendment was well thought out [1] and I called my senators to support that.
The newly proposed amendment from Warner-Portman-Sinema [2] could cause a few issues that I see:
1) Limiting the Lightning Network for Bitcoin, which enables off chain, instant, low fee payments (I think that Bitcoin itself would be fine considering that it is proof of work).
2) Limiting DeFi protocols.
3) Limiting proof of stake coins. My guess is that Senators Warner, Portman, or Sinema couldn't describe the difference between proof of work and proof of stake if asked. However, they have only called out proof of work in their newly proposed amendment. I think both miners in proof of work and stakers / validators in proof of stake are worth protecting given that both consensus mechanisms have pros / cons. One benefit of proof of stake is that it uses a lot less energy, which seems like a big oversight to not include in their amendment. Asking miners or stakers / validators to KYC and provide 1099s for transactions they are processing is not even possible right now. If the senators understood the technology in more detail then they would understand that this is unenforceable.
I understand the narrative that crypto is being included in this infrastructure bill to try to help pay for it. OK, sure. I also think that folks should pay their crypto taxes. However, I'm not really OK with senators who don't understand the tech in depth to make laws about it.
I also do think that this could drive crypto innovation outside of the US, moving jobs elsewhere. I think the US has an opportunity to be a crypto hub just like they are the predominant player in the equity markets. I believe we should foster crypto innovation in the US, not stifle it.
This video from Charles Hoskinson [3], co-founder of Ethereum (which is moving to proof of stake from proof of work) and the founder of Cardano (which currently utilizes proof of stake), has some commentary on this as well.
Crypto can be withdrawn from exchanges to a personal account that only that individual controls. This is unlike stocks, which sit in brokerages and could only be transferred to another brokerage (in kind transfer).
An example for someone in the US is that they buy crypto on Coinbase, and then they withdraw that crypto to a hardware wallet that they have control of. They leave their crypto on their hardware wallet for a few years and then transfer all or maybe only some portion of it to a different exchange, say, Kraken, and sell it there. How do the exchanges file a 1099 for that?
Maybe while the crypto was on the individual's hardware wallet, they also used some of it to purchase some goods or services. How is that tracked except on the individual's tax return?
I'm for regulation because I think it means the crypto space will mature and more people will feel it is safe to get involved. I also don't think people should use crypto for avoiding taxes (I do think that is overblown in the media considering that most blockchains are literally a public ledger, and all the government needs are some crypto experts and they can look at current as well as previous years of transactions, so folks shouldn't be doing anything shady).
I do also think that laws should adapt to new technological innovations. The only issue is that there isn't a critical mass yet that this technology is here to stay. The analogy is like fitting a square peg into a round hole. That's what the government is trying to do by over regulating crypto with regulations from the 20th century.
I actually would love if crypto exchanges could somehow give 1099s. That would extremely simplify the crypto tax reporting process, which right now can be very complicated, but I just don't see how it would work unless individuals only bought crypto on an exchange, left it on that exchange, and only sold whatever they bought on that exchange.
If someone withdrew their crypto, or deposited fresh crypto and sold it the exchanges would note it as part of the 1099, just like a brokerage would if you transferred stock. It would then be the taxpayer's responsibility to correctly report their buy and sell prices. You could cheat, of course, but you might get caught. Issuing 1099s at least simplifies the tax process and captures capital gains in a lot of cases.
It is already the taxpayer’s responsibility to report their capital gains.
The IRS has issued "John Doe" summons to Coinbase in 2016 [1] and Kraken in 2021 [2]. They also already gave warnings to 10,000 US tax payers, in 2019, that they thought did not pay their fair share of crypto taxes [3]. They are working with plenty of information already.
Anyone who chooses to omit capital gains from crypto may also see consequences in the future. Most blockchains are immutable public ledgers. The auditing of this technology will only get more advanced over time.
To your point about depositing, how does the exchange know the original price that the crypto deposited was purchased at, when it could’ve been purchased elsewhere (including a different centralized exchange like Coinbase, Kraken, KuCoin or Binance, or a decentralized exchange like Uniswap), or perhaps it was mined, or perhaps it was from a fork of another coin (with the current US tax laws, the cost basis is zero from a fork). It’s not as simple as you are making it sound when the source of the crypto is unknown.
How would formal verification actually work for a single exchange to calculate cost basis, i.e. the gain or loss, considering all these different cases? The people making these laws do not actually know in practice how these things would be enforced by the exchanges. They are trying to fit old securities laws into a new technology. Just saying that's it's too complicated is not the right answer. I think laws should be adjusted to accommodate for new innovations. I also think people should pay their taxes and crypto should not be used as a method of tax avoidance.
You don't want to stay in an org that allows such behavior, or you're wanting to take a career break? Maybe it could be good to decide which of those it is?
If you just don't want to stay at that company, maybe find a new job first, before quitting? 400k in equity is a pretty decent amount. Also, although hiring and salaries are crazy right now, so are the interview processes.
I think it is notable that Switzerland also has very favorable capital gains laws though, at least for private investors. Could hold stocks, gold / silver or crypto in Switzerland and not pay tax on gains as long as you hold them for 6 months or more, and didn't make more than 50% of your income from capital gains. [1]
Some is going there too, but it's a much smaller piece of the pie. Real Estate also has utility - you can live in it. Gold's utility is much lower - sure you can make jewelry out of it's used in small amounts in electronics. Crypto basically has no utility.
The utility of money is the ability to trade it for any utility that is for sale. Money itself shouldn't have any inherent utility, other than being able to reference any other utility in the amount that the money holds value. It's like a magic wand that can make a wish true. The medium of money is just there to store and transfer the information for the amount of magic you can wield. This is why money is always overvalued compared to the medium's inherent utility.
There are many other things that are overvalued, such as real estate - because there's an expectation that they can be used to trade for something else later. In other words, they're bought solely because they're expected to hold their buying power, i.e. they're used as money. The reason why this happens is because modern fiat money doesn't have this property - it's expected to not hold its buying power.
Now, there is money that holds its buying power - bitcoin. It's expected that in the coming years most of the value from real estate and other overvalued assets will transfer into bitcoin, because there's no reason any more to own them other than for their utility.
> There are many other things that are overvalued, such as real estate
I'm not sure RE is overvalued. There's a shortage of houses at a time when Millennials (the largest generational cohort so far) are hitting peak household formation.
> Now, there is money that holds its buying power
Bitcoin peaked at around $64K in April 2020. Now it's currently at $38K - it was down to about $30K a month ago. Seems pretty volatile for something that "holds it's buying power".
Isn't it less there being a shortage of houses, and more there being no way to dislodge market jams and speculators?
I know the claim recently was that there were more unoccupied homes than homeless people. Even if you factor out the undesirable/impractical ones, I'd expect if we had some means to unlock that capacity, it would glut and crash the market down to (much closer to) affordability.
It feels like this is one of many problems that are trivial to solve in the abstract, but intractable as long as we worship private-property rights. A simple fix would be an >100% annual value tax on unoccupied dwellings. The vacant-50-weeks-a-year vacation house, or the 'investment property' you're holding to sell in a few years, becomes an instant financial grenade, where it's better to hand the deed over to your pizza delivery guy as a tip than to be not living in it when the tax bill comes due.
Transferring payments across the world is functional, and yes, the traditional financial system also does this, but it doesn't mean crypto has no functionality.
Edit: Previous statement I was responding to has changed. I still don't agree that crypto has no utility though. I agree with almost everything I was responding to except that part. Yes, real estate has more utility, for sure. To me it doesn't matter that crypto has some overlap with traditional finance. This is an iteration on technology, which has its own pros/cons, but some folks are trying to come up with something better. Time will tell if that succeeds or not. IMO, it's too early to tell. You can also see that I wasn't the only person who responded to the parent comment that Bitcoin may be a competitor to capital flowing to gold as a potential inflation hedge.
Ok, but as you point out it's not a unique in transferrability - once you've transferred that crypto in the end it's still crypto - you can't live in it or even use it to make jewelry. Locking in your mortgage payment is an inflation hedge and you get a house to live in. Millennials are into the peak home buying years and are now the largest generational cohort. Add to this that we haven't built enough housing to keep up with population growth over the last dozen years or so and this is why housing has gone up so much.
My understanding is that foreign real estate buyers have also pushed real estate prices up. That said I think you make a lot of good points and crypto is about the only thing I disagree with you on.
This is like saying that a rock is functional because it can be transferred from one place to another. Sorry, "being transferred" is not a function that is performed by the object that is being transferred.
If you have technology that can transfer a rock across the world in seconds then I would be interested in that. Same w/ crypto (with the added benefit of crypto not requiring a centralized entity to do so).
My main point is let's wait and see how this new technology evolves instead of just shooting it down. I don't think everything about traditional finance is perfect. Negative interest rates in some parts of the world are one sign of that.
I think we can iterate on traditional finance as well as explore other potential solutions. The aversion to cryptocurrency as a technology, when Bitcoin has only been around for a bit over a decade, seems premature to me.
There have been comparisons of cryptocurrency to the internet, which everyone may not agree with, but what if we just shut down the internet before it really took off? Well, we wouldn't be having this conversation.
I don't think after a decade it is "premature" to jump to conclusions. If someone hasn't been able to figure out bitcoin by now, they probably never will (in my opinion, it takes about 20 minutes to a person of an average intelligence).
When something's too big and heavy to move you turn it into a financial instrument anyway and change (e.g. yap stones) the ownership.
I still think there's something a little bit special about bitcoin. It simultaneously has the properties of modern electronic currency BUT has some elements of "permission-less-ness" like cash or gold.
You could live in the same real estate 10 years ago, when its price was 3 times lower. So 1/3 of real estate price comes from utility, and 2/3 is pure fiction. More precisely, 2/3 of real estate price represents its utility as a storage of wealth.
I've found that it can take longer than 15 minutes to get back in the groove. There is certainly something that happens while coding, i.e. "being in the zone". In my experience, it can take some time to get back to that high productivity, high focus zone. Getting back to a low or medium productivity is easier.
Although I agree that just because there's a meeting in the afternoon, it's not like you can't start something big (could also start something small, or chunk up the big task), however, I think the article still has something useful to remind managers, even today.
Bitcoin does not print money or have a high inflation rate, and that is the point of it (it was the original cryptocurrency that took off, so saying that the whole crypto sphere is bad is kind of like saying that because there is some bad software that all software is bad, or that because there is one stock that is bad that all stocks are bad). The max supply of Bitcoin is capped. I don't think that Bitcoin is the only digital asset worth investing in, but I also don't think it is valid to claim that all crypto is printing money, or that all crypto is bad.
I am a crypto fan. I don't think that it's the only way of storing wealth. I also invest in an S&P 500 index. I do think that crypto has a higher potential to beat inflation over time, with inflation currently at 5.4% [1], vs stocks. US stocks have been propped up by The Fed printing USD (which they can due to it being the world reserve currency, which may or may not last forever) and investing it into Wall Street, as well as dropping lending rates to essentially zero, since the March 2020 crash. The Fed has already signaled their intention to raise rates in the next few years, which would damper some of the bullishness of the stock market.
Crypto is a new asset class that investors can consider if they have some risk tolerance, with the potential for a high reward. The thing that I think a lot of people miss is that traditional finance is by no means perfect. There are negative interest rates in some parts of the world (i.e. see Europe). There have been synthetic assets in traditional finance like CDO's (i.e. see The Big Short), which are detached from reality (and assets like that will continue to be created because big money will continue to be bailed out). The current P/E ratios of even some popular stocks (i.e. TSLA) don't reflect traditional fundamentals, so there is a lot of speculation, just like with crypto (I don't think that speculation is bad, there are folks betting on what a company or a technology can become in the future). Also, the US Debt increases every year, with no signal that they will ever pay it back. Based on all this, I think it is worth considering some other asset classes to invest in vs purely traditional finance.
Anyway, just because crypto is not perfect and the space has many digital assets (and not everyone understands them), it doesn't mean that as a whole that it's bad and should be destroyed. There's so much already invested in the crypto space, and it's not just capital, it's startups and human time invested (like any other software project or field). People will continue down this path in one way or another. Regulation will likely mature the space and more people will feel comfortable to invest in it based on that. I think that crypto will at least exist alongside traditional finance, even if it does not completely transform it, and it's worth being open to seeing how this technology can benefit us all.
[1] https://www.usinflationcalculator.com/inflation/current-infl...