
Tom Lee Predicts Cyrptocurrency Market Outflow to Fiat Currency Before Tax Day - AltcoinReport
https://altcoinreport.co/tom-lee-predicts-massive-crypto-outflow/
======
personlurking
Someone used a throwaway account to share their recent personal experience on
this matter at /personalfinance, titled "I just discovered that I owe the IRS
$50k that I don't have, because I traded in cryptos."

Original:
[https://www.reddit.com/r/personalfinance/comments/84huks/i_j...](https://www.reddit.com/r/personalfinance/comments/84huks/i_just_discovered_that_i_owe_the_irs_50k_that_i/)

Update:
[https://www.reddit.com/r/personalfinance/comments/89ipyu/upd...](https://www.reddit.com/r/personalfinance/comments/89ipyu/update_i_just_discovered_that_i_owe_the_irs_50k/)

They removed the story inside their update, but Google cached it:
[https://i.imgur.com/0DspXDr.png](https://i.imgur.com/0DspXDr.png)

~~~
antisthenes
That makes NO sense at all and I continue to be surprised at the fundamental
misunderstanding of the US tax system by techies (it's really not that
complicated for individuals).

You pay tax on the GAINS, not on the value of the trade. If he owes the IRS
$50k, it means he has a _realized_ gain of ~$333,000. Where did that money go?

The only possibility here is that he took $330,000 and reinvested ALL of it
into 'altcoins' just before the end of the year and is still holding them.

Sorry, but that has bullshit written all over it (throwaway account, too)

~~~
dustingetz
1/ Short term, so 50k tax is 150k gains

2/ Your possibility is correct - the IRS computes tax on USD-equivalent as of
trades completed Dec 31; but the USD price crashed in 2018'Q1, and he can't
pay his tax bill in crypto. He can deduct the USD-equivalent losses next year
but only against capital gains, not his W2 income, and the tax is due now in
USD.

~~~
dustingetz
Continued: As a though experiment: lets say 100% of crypto traders owe 1/3 of
their gains (obviously not real). There is nowhere close to enough USD
liquidity to handle a sell like that and it would liquidate everyone and still
leave them unable to pay their USD tax bill.

The apparent USD liquidity is mostly actually Tether liquidity. There is not
actual USD liquidity – nobody is buying huge amounts of BTC who doesn't
already have it – so we don't even have pricing data on what the USD price
_is_ , all that data has been corrupted by systemic exposure to Tether.

Obviously the thought experiment is totally absurd but it raises questions
like, what exactly is the tipping point and how much liquidity is there
actually?

~~~
provost
Gains are only realized when they sell, so liquidity doesn’t matter if they
don’t sell.

~~~
dustingetz
It matters if you traded alts, which all of reddit was doing for the last six
months and what this whole issue is about

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simias
I'm not familiar with this person so I followed the link to his previous
prediction of BTC reaching "$25,000 by the end of 2018" from January:
[https://altcoinreport.co/tom-lee-predicts-bitcoin-
price/](https://altcoinreport.co/tom-lee-predicts-bitcoin-price/)

> “We expect bitcoin’s major low to be $9,000, and we would be aggressive
> buyers around that level … We view this $9,000 as the biggest buying
> opportunity in 2018.”

BTC is currently trading at about $6,500. At this point I'd sooner believe
cartomancers when it comes to cryptocurrency market predictions, the market is
too irrational and easily manipulated to make these types of predictions IMO.
Might as well try to guess the outcome of tonight's lottery.

~~~
trophycase
Or they are just bad at predicting it

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jaycroft
A couple related observations:

1) With the dramatic rise and then fall of the Nasdaq back in 2001, with
similar timing (peak right around New Years Day [0]), and a similar amount of
new and uninformed market participants (online day trading just beginning to
become a thing), could some of the early 2001 market performance be due to a
similar dynamic? Noob traders make bank in 2000, log in to H&R block, start
doing their taxes, and then have an _oh shit_ moment when they come to the
question about "have you bought or sold any stocks this year?"

2) Stock trading happened through United States institutions. Much of crypto
trading does not. Many people may have started with $1k in Binance or
Bitfinex, and seen that go up by more than a multiple of 10. Many of those
people, I feel, are likely to accidentally commit a felony this year by
failing to report their foreign account holdings because they are similarly
unaware of the consequences of having money outside their down the street
bank. FBAR is a real thing, people face serious fines (at least up to 10k for
any infringement, 10k plus half your offshore assets and potential jail time
if willfully [1]).

[0][http://futures.tradingcharts.com/historical/ND/2001/0/contin...](http://futures.tradingcharts.com/historical/ND/2001/0/continuous.html)
[1][https://www.irs.gov/businesses/small-businesses-self-
employe...](https://www.irs.gov/businesses/small-businesses-self-
employed/report-of-foreign-bank-and-financial-accounts-fbar)

~~~
lavezzi
"The IRS will not impose a penalty for the failure to file the delinquent
FBARs if income from the foreign financial accounts reported on the delinquent
FBARs is properly reported and taxes are paid on your U.S. tax return, and you
have not previously been contacted regarding an income tax examination or a
request for delinquent returns for the years for which the delinquent FBARs
are submitted."

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debatem1
Minor typo but can someone fix the title? Cryptocurrency is misspelled as
Cyrptocurrency.

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sowbug
This happened in 2000. 1999 was a heck of a year for amateur daytraders.

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ttul
I’m sure altcoinreport.co is as reputable as, say, the Wall Street Journal

~~~
bitxbitxbitcoin
Maybe in a few decades if it's still around. I'm sure they're hopeful of that
at least :).

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cvaidya1986
Why would people wait till Tax day to sell in order to pay taxes?

~~~
neaden
Presumably if you think BC is going to go continually up you want to wait
until the last minute to sell.

~~~
charlesdm
Get rich or die trying?

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xur17
I am really curious where he's getting the $25 billion in capital gains figure
from the report, and what percentage of gains it assumes people realized.

------
AltcoinReport
Due to the massive amount of capital gains taxes owed on crypto, Tom Lee
believes there will be a sell off in order to pay these taxes. Following tax
day, he believes Bitcoin will find footing again.

~~~
abbieseide
A decrease of $20 for every $1 pulled from the market seems a little steep...

~~~
User23
Or maybe it's not steep enough. A forced-sell situation doesn't leave much
pricing power. The classical Roman fire-sale is the archetypical case. Also
I'm sure many taxpayers will elect not to pay the capital gains before tax
day, deciding instead to ride out interest and penalties in favor for being
able to sell at a higher price. This could get interesting.

I would love to see an after the fact analysis that deduces the relative
market power of buyers and sellers from the transaction history.

~~~
smacktoward
For those who don't get the reference to "the classical Roman fire-sale":
[https://en.wikipedia.org/wiki/History_of_firefighting#Rome](https://en.wikipedia.org/wiki/History_of_firefighting#Rome)

 _> The first ever Roman fire brigade of which we have any substantial history
was created by Marcus Licinius Crassus... One of his most lucrative schemes
took advantage of the fact that Rome had no fire department. Crassus filled
this void by creating his own brigade—500 men strong—which rushed to burning
buildings at the first cry of alarm. Upon arriving at the scene, however, the
fire fighters did nothing while their employer bargained over the price of
their services with the distressed property owner. If Crassus could not
negotiate a satisfactory price, his men simply let the structure burn to the
ground, after which he offered to purchase it for a fraction of its value._

Through this and other schemes, Crassus became one of the richest men in Rome.
He used this fortune to amass substantial political power, eventually rising
to the peak of power in the Roman system by joining the First Triumvirate
([https://en.wikipedia.org/wiki/First_Triumvirate](https://en.wikipedia.org/wiki/First_Triumvirate))
with Pompey the Great and and ambitious young go-getter named Julius Caesar.

------
_0ffh
How come the wording? Cryptocurrencies are inherently no less fiat currencies
than government mandated ones.

~~~
SideburnsOfDoom
That's a good question, and I too would like to know why people consider
Cryptocurrencies to be "not fiat" ?

Currencies either have value from

1) Being made of a commodity (e.g. gold coin) or exchangeable for the
commodity.

2) Because someone says so. This is "Fiat". Usually this is a government, not
not necessarily so. See "company scrip" for another example.

Lack of an issuing government does not magically create a backing commodity.

~~~
lilactown
Because I can't actually buy anything with them, outside of a few niche
markets.

~~~
someguy9888
Haha. Aside from the things I can buy with it, I can't buy anything with it!

~~~
lilactown
Just because I can exchange Chuck-E-Cheese coins or WoW gold for certain
specific goods and/or services doesn't make them fiat.

~~~
SideburnsOfDoom
> Just because I can exchange Chuck-E-Cheese coins ... for certain specific
> goods and/or services doesn't make them fiat.

So what does it make them then? As far as I know, the categories are "fiat" or
"commodity-backed". If it's not Fiat, which commodity backs Chuck-E-Cheese
coins?

Or is it merely backed by the say-so of the Chuck-E-Cheese company? You
understand that "say-so" in Latin is "fiat"?

Isn't this just a form of "Company Scrip", a (low quality) Fiat instrument?

[https://en.wikipedia.org/wiki/Company_scrip](https://en.wikipedia.org/wiki/Company_scrip)

[https://thebluecollareconomist.com/2016/10/30/fiat-
currency-...](https://thebluecollareconomist.com/2016/10/30/fiat-currency-
scrip-by-another-name/)

