Ethereum (and other cryptocurrencies)

[ichiokuen]

Hi Roger,

So did you take the leap back in November 2020?
You'd be sitting pretty right now if you'd had!

Please let us know.
Thanks

[adamu]

Hi Adamu,

However, hardware wallet + transaction costs will save you losing huge amounts to the middlemen and even more speculation involved in the crypto funds.

Could you please explain this? What middlemen do we lose money to? I thought that to exchange your crypto to cash you'd need to use an exchange(middleman) anyway.

I was comparing investing in crypto funds to investing in crypto directly.

With a crypto fund, you have the fund's expense ratio to pay, plus the fund price diverges from the underlying value of the crypto asset.
If you buy the crypto asset directly, you get the underlying value (if there is such a thing in crypto...) and there's no annual fee.
Yes, to buy crypto you need to use an exchange, but services like Bitflyer currently don't charge transaction fees for trading.
There is a network fee to transfer the money out of the exchange, but it's minor compared to the ongoing expenses of investing in a mutual fund (at least it was last time I checked).

And how does using a hardware wallet shield you from speculative market movements? Price goes up or down whether you have your crypto in a wallet or on an exchange.

It doesn't shield you from market movements. Sorry it wasn't phrased well. I was referring to the divergence that a fund has over buying the crypto directly.

[ichiokuen]

Hi again Adamu,

Thanks for your reply and clarification. Fund vs. direct purchase, got it.

Still, using a hardware wallet has no bearing on using a fund versus directly buying crypto, no? Whether you use a hardware wallet or cold storage or leave it on the (Bitflyer) exchange, it is all the same-except of course you need to pay a fee to take it off the exchange to put it on your hardware wallet, right?

Thanks again, and a side question, if your don't mind answering, you said you had a Bitflyer account years ago, did you go to another exchange or did you get out of crypto?

Edit: I have a small position in ETH and BTC.

[MajesticSoup]

I think moving from one wallet to another should be fine as long as the wallets remain in your name. If you're transferring to another person's wallet then that would likely trigger a gift tax event.

With exchanging crypto though, the miscellaneous taxable event should only occur when you exchange it for a fiat currency.

I am not sure what the circumstance would be for directly exchanging a crypto currency for another crypto currency would be though e.g directly exchanging BTC for ETH. I guess it would maybe trigger a miscellaneous taxable event based on the fiat value of the BTC and ETH at the date/time the exchange took place?

> With exchanging crypto though, the miscellaneous taxable event should only occur when you exchange it for a fiat currency.

Can you provide sources for your claim? Everything I've read suggests that crypto to crypto is taxed.

[Chris]

I think moving from one wallet to another should be fine as long as the wallets remain in your name. If you're transferring to another person's wallet then that would likely trigger a gift tax event.

With exchanging crypto though, the miscellaneous taxable event should only occur when you exchange it for a fiat currency.

I am not sure what the circumstance would be for directly exchanging a crypto currency for another crypto currency would be though e.g directly exchanging BTC for ETH. I guess it would maybe trigger a miscellaneous taxable event based on the fiat value of the BTC and ETH at the date/time the exchange took place?

> With exchanging crypto though, the miscellaneous taxable event should only occur when you exchange it for a fiat currency.

Can you provide sources for your claim? Everything I've read suggests that crypto to crypto is taxed.

Sorry, I did mention I was not sure about crypto the crypto exchange. But I can understand how my reply could be miss understood/taken out of context.

The part about the "miscellaneous income" taxable event was about a previous question when the person was asking about transferring from one wallet to another - of which I answered that transferring from one wallet to another is not a "miscellaneous income" tax event, but would be a "gift tax" event should the wallet holder be different to the person transferring the crypto funds.

[mighty58]

services like Bitflyer currently don't charge transaction fees for trading.

Technically they don't charge a fee for the trade per se, but there is usually a substantial spread (1-5%) between the buy/sell prices, so you should consider that your built-in fee.

[adamu]

Technically they don't charge a fee for the trade per se, but there is usually a substantial spread (1-5%) between the buy/sell prices, so you should consider that your built-in fee.

If you buy directly from them. But they have a marketplace that works the same as the stock market, where you can bid/ask whatever you want.

https://lightning.bitflyer.com/?lang=en

[adamu]

I'm staring to look into whether I should sell what leftover cypto I have. Even the "just forget about it" stuff is sitting at 17% of my net worth

Although if I'd have left it alone a few years ago, my net worth would be many multiples of what it is now...

I think I'll leave it a few months and think of dusting off the trading account if it breaches 20%. One thing I learned from the windfall last time, the tax treatment is very unfavourable so as a rule of thumb will just assume half goes to tax when selling.