Connect with us

Cryptocurrency

Tax on income you never earned? It’s possible after Ethereum’s Merge

Avatar photo

Published

on

After much buildup and preparation, the Ethereum Merge went smoothly this month. The next test will come during tax season. Cryptocurrency forks, such as Bitcoin Cash, have created headaches for investors and accountants alike in the past.

While there has been progress, the United States Internal Revenue Service rules still weren’t ready for something like the Ethereum network upgrade. Nonetheless, there seems to be an interpretation of IRS rules that tax professionals and taxpayers can adopt to achieve simplicity and avoid unexpected tax bills.

How Bitcoin Cash broke 2017 tax returns

Because of a disagreement over block size, Bitcoin forked in 2017. Everyone who held Bitcoin received an equal amount of the new forked currency, Bitcoin Cash (BCH). But when they received it caused some issues.

Bitcoin Cash was first issued in the fall but didn’t hit Coinbase or other major exchanges until December. By that time, it had gone up significantly in value. For tax purposes, receiving free coins is income. Suddenly, many investors had a lot of income to claim that they hadn’t anticipated.

Related: Get ready for a swarm of incompetent IRS agents in 2023

Many crypto-savvy accountants advised clients to claim the value of Bitcoin Cash when it was issued, not when it finally arrived in their exchange accounts. No IRS guideline explicitly said this was OK — in fact, it runs contrary to the accounting principle of dominion and control — but it seemed like the only reasonable way to handle the issue.

Airdropped proof-of-work ETH is another gray area

As a result of the problems with reporting income from Bitcoin Cash, the IRS issued Revenue Ruling 2019-24 to address the treatment of blockchain forks. According to the ruling, forks that result in the airdrop of a new currency to an existing holder are taxable accessions to wealth. While not the usage of “airdrop” most investors are used to, the IRS uses the term to describe when the holder of an existing cryptocurrency receives a new currency from a fork.

The potential confusion with the Ethereum upgrade is that assigning the forked and original currency based on the ruling alone is unclear. One can easily see how the IRS could take the position that, following the upgrade, the Ether (ETH) tokens held in wallets and exchanges across the world is a new coin, and that Ethereum proof-of-work (PoW) — which continues on the legacy network — is the original.

While the argument makes logical sense, this position would also result in chaos. Every US taxpayer who held ETH — or assets such as nonfungible tokens (NFTs) based on Ethereum smart contracts — on Sept. 15 would have to claim its value as ordinary income. Though it’s using the old technology, Ethereum PoW is clearly the “new” coin.

The assets of the investor haven’t changed — rather, the underlying consensus mechanism was upgraded. Plus, unlike Bitcoin Cash, which stemmed from a disagreement with two legitimate sides, the Ethereum upgrade had widespread support and was only opposed by self-interested miners.

Related: Biden is hiring 87,000 new IRS agents — And they’re coming for you

Another example would be when EOS froze the Ethereum-based EOS token and moved the holders to the EOS mainnet. The continuation of the coin on the EOS network was not viewed as taxable, as rights were simply teleported to another chain with the same ticker symbol. (Crypto exchange traders probably didn’t even notice.)

Is the “new coin” always the lesser coin adopted? Is a coin its technology or its community? The IRS likely won’t rule on this before Tax Day in April, so taxpayers and advisors will just have to make the call. But it seems like the choice is clear.

Additional considerations for investors and developers

Tax-savvy Ethereum holders may want to wait and see if Ethereum PoW is adopted before they attempt to access the coins. Accepting them will guarantee taxable income without leaving room for an argument that the fork is a half-hearted fork/farce/scam, like many of the derivative Bitcoin forks in 2017–2018, which had thinly traded values ​​on remote exchanges.

If the value of Ethereum PoW drops before an investor sells, it can mean a tax bill that exceeds the value of the asset. (Bitcoin Cash dropped from over $2,500 in value to under $100 in 2018, save for a short-lived spike in 2021). On the other hand, Grayscale Ethereum Trust’s Sept. 16 press release indicates it will claim, sell or distribute proceeds related to the ETH POW coin, so there may be some value to report at the end of the day.

Related: Post-Merge ETH has become obsolete

It takes some doing to claim Ethereum POW that is worth less than 1% of the corresponding quantity of Ethereum. Early adopters often have an advantage in crypto, but a fork is one case where patience could be prudent.

Any crypto developers considering a fork should bear in mind that forks always create tax headaches, the severity of which varies based on the rationale for and execution of the fork. Assuming the IRS follows the lead of the crypto tax community again, the Ethereum upgrade provides an example of how to do it right.

Justin Wilcox is a partner at the Connecticut accounting and advisory firm Fiondella, Milone & LaSaracina. He founded the firm’s cryptocurrency practice in 2018, providing tax and advisory services to Web3 organizations and crypto investors. He mines cryptocurrencies like DOGE (though he still supported the Ethereum Merge). He holds various cryptocurrencies and NFTs, including coins mentioned in this article.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Cryptocurrency

Bitcoin Price and Ethereum Prediction; Fantom Rockets Over 35%

Avatar photo

Published

on

Bitcoin, the leading cryptocurrency, struggled to break above the $17,250 level on December 2, and it is now heading lower to $16,900. Similarly, Ethereum, the second-most valuable cryptocurrency, has fallen after being rejected at the $1,300 level and is currently consolidating near $1,275.

Major cryptocurrencies were trading in the negative early on December 02, as the global cryptocurrency market value fell over 1.30% to $849.73 billion on the previous day. Over the last 24 hours, overall crypto market volume fell 14 percent to $42.61 billion.

The entire volume in DeFi was $2.99 ​​billion, accounting for 7% of the total 24-hour volume in the crypto market. The overall volume of all stablecoins was $40.66 billion, accounting for 95% of the total 24-hour volume of the crypto market.

Let’s take a look at the top 24-hour altcoin gainers and losers.

Top Altcoin Gainers and Losers

Three of the top 100 coins that have gained value in the last 24 hours are EthereumPoW (ETHW), GMX (GMX), and Terra Classic (LUNC). The price of ETHW has increased by more than 20% to $4, the price of GMX has increased by more than 14% to $55, and the price of LUNC has increased by nearly 10%.

Top Altcoin Gainers and Losers – Source: Coin360

BinaryX (BNX), Curve DAO Token (CRV), and Dogecoin (DOGE) are three of the top 100 coins that have lost value in the last 24 hours. Whereas BNX has lost about 6% to trade at $130, CRV is down nearly 5% to trade at $0.6350. At the same time, the DOGE price is down over 5% to trade at $0.099.

Fed Chair Jerome Powell’s Dovish Remarks

The reason for its rise can be attributed to Fed Chair Jerome Powell’s dovish remarks, which were critical in supporting cryptocurrencies such as Bitcoin.

Jerome Powell, the chairman of the Federal Reserve, stated that the bank will slow the rate at which it raises interest rates at its upcoming meeting.

Furthermore, the US dollar’s drop to a three-month low was viewed as an important factor supporting higher Bitcoin prices, as BTC has a strong inverse relationship with the US Dollar Index.

Revenue from Bitcoin Mining Drops

In contrast, Block Research data show that revenue from Bitcoin mining fell by 19.9% ​​in November to approximately $472.64 million. This was seen as one of the key factors in keeping any additional gains in BTC gains under control.

Transaction fees accounted for only a small portion of bitcoin mining revenue ($12.32 million), with the block reward subsidy accounting for the majority of revenue ($460.32 million).

Bitcoin transaction fees now account for about 3% of total revenue, representing a marginal increase.

In terms of earnings, Bitcoin miners outpaced Ethereum investors by a factor of about 5.3. Moving on, traders appear wary of placing any strong bids ahead of US payroll data that is likely to influence monetary policy.

bitcoin price

The current Bitcoin price is $16,970, and the 24-hour trading volume is $25 billion. During the last 24 hours, the BTC/USD pair has gained above 0.50%, while CoinMarketCap currently ranks first with a live market cap of $358 billion, up from $323 billion yesterday.

It has a total supply of 21,000,000 BTC coins and a circulating supply of 19,221,593 BTC coins.

Bitcoin Price & Tokenomics – Source: coinmarketcap

The BTC/USD pair struggled to break through the $17,250 level, and the closing of doji and spinning top candles indicate the possibility of a bearish correction.

On the downside, Bitcoin has completed a 23.6% Fibonacci retracement at $16,900, and closing candles below $16,950 may trigger additional selling until the $16,750 level.

Bitcoin Price Chart – Source: Tradingview

Further down, Bitcoin can target the $16,600 level, which is extended by 50% Fib level, and a break below this can expose BTC to the $16,450 level, which is extended by 61.8% Fib level.

On the upside, a bullish breakout of the $17,250 level could expose BTC to 17,650 and $18,100 levels.

Ethereum Price

The current price of Ethereum is $1,274, with a 24-hour trading volume of $6 billion. In the last 24 hours, Ethereum has lost nearly 1%. CoinMarketCap currently ranks #2, with a live market cap of $155 billion. It has a circulating supply of 122,373,866 ETH coins.

Ethereum Price & Tokenomics – Source: coinmarketcap

On the 4-hour chart, Ethereum traded bullishly but failed to break above the $1,310 resistance level, triggering a bearish correction.

The tweezers’ top pattern is weakening the bullish trend and may result in a bearish market correction.

On the downside, Ethereum’s immediate support is likely to be around $1,225, with a drop to $1,150 possible.

Ethereum Price Chart – Source: Tradingview

The MACD and RSI indicators are diverging because the MACD is in a selling zone while the RSI is still in a buying zone. In addition, the 50-day simple moving average (SMA) is still indicating a buying trend.

A bullish breakout of the $1,310 level, on the other hand, could expose the ETH price to the $1,354 level.

Fantom Rockets Over 35%

Fantom extended its upward momentum on December 02 despite rumors that the Fantom Foundation makes regular earnings and has 30 years of the runway without needing to sell any FTM tokens.

FTM price rose about 35% to hit $0.24, its highest level in three weeks. The rise comes as a part of a bigger rebound trend that started when it bottomed out at roughly $0.17 on Nov. 22. This translates to a 50% price rebound in the last eight days.

Interestingly, the rally took up momentum after the Fantom Foundation’s “Architect,” Andre Cronje, disclosed the firm’s financial documents on Nov. 28, disclosing that it had $340 million worth of digital assets and had been making over $10 million annually.

FTM Price Chart – Source: Tradingview

In terms of technical analysis, the FTM/USD has completed a 61.8% Fibonacci retracement at $0.2580. On the plus side, a break above $0.2580 could expose FTM to $0.2830 or $0.3100.

On the downside, FTM’s immediate support is at $0.2410, and the price can fall as low as $0.2235 and $0.2015.

Presale Cryptocurrency With Massive Profit Potential

Dash 2 Trade (D2T)

Dash 2 Trade is an Ethereum-based trading intelligence platform that provides traders of all skill levels with real-time analytics and social data, allowing them to make better-informed decisions. The platform will go live in the first quarter of 2023, providing information to investors to assist them in making proactive trading decisions.

Dash 2 Trade has also been a success, with two exchanges (LBank and BitMart) promising to list the D2T token after the presale concludes. 1 D2T is currently worth 0.0513 USDT, but this will increase to $0.0533 at the end of the sale. D2T has raised far more than $7.7 million by selling more than 88% of its tokens.

Visit Dash 2 Trade now

Find The Best Price to Buy/Sell Cryptocurrency

Cryptocurrency Price Tracker – Source: crypto news

Continue Reading

Cryptocurrency

Green Cryptocurrency May Be the Future – This One Just Added Dyson and Samsung as Affiliate Partners

Avatar photo

Published

on

Disclaimer: The Industry Talk section features insights by crypto industry players and is not a part of the editorial content of Cryptonews.com.

The Impact project has added Samsung and Dyson as affiliate partners. This platform’s IMPT token is an ideal asset for value-seeking investors to have in their portfolios.

Samsung and Dyson Join the Impact Project’s Affiliate Network

This week, Impact Project expanded its affiliate network by adding two of the world’s biggest companies. Korean technology conglomerate Samsung and Singapore-based household appliances company Dyson has joined the platform’s network of partners, with both firms committing to a greener future by using the Impact Project as a channel.

With this new move, the Impact Project has continued to grow its ever-expanding affiliate network as it looks to bring the corporate landscape to a greater consciousness of the climate challenges faced by the world.

More than 25,000 companies worldwide have already signed deals to join the Impact Project’s network. In one way or another, these companies will integrate the platform into their operations, enabling their customers to shop, make payments for carbon credits, and offset their carbon footprint.

Of the 25,000-plus companies in the Impact Project’s affiliate network, over 10,000 are retailers. These companies will reward their customers with IMPT tokens for using the platform while also serving as an incentive for other companies to do the same.

Transforming the Carbon Credit Landscape

The Impact Project is a blockchain-based platform looking to make it easier for individuals and companies to purchase carbon credits. Built on the Ethereum blockchain, the initiative has gained massive buzz in the crypto market for its potential to transform the fight against climate change.

So far, Impact Project is operating in an untapped niche. For years, many have asked that the blockchain space be more active in the fight against global warming. And while there is still much to be desired, platforms like the Impact Project are leading the charge and showing that blockchain can be a force for good.

The Impact Project has recognized the need for blockchain to be at the center of the fight against climate change. The platform aims to optimize the trading process for these credits, improving efficiency and transparency in the process while taking industry players away from the old and antiquated processes that have been so far the standard.

Since the state-based credit issuance system has been prone to inefficiency and bureaucracy, interested buyers have found it more challenging to purchase these credits over time.

The Impact Project will also address the liquidity problem, with credits being offered as non-fungible tokens (NFTs) that would allow users to trade seamlessly and efficiently. Users can control the number of tokens in circulation while also choosing whether or not they’d like to sell or burn them entirely.

Buy IMPT & Create a Better World

IMPT, the native token for the Impact Project, is one of the most exciting coins on the market. The coin, available on presale, has been available on presale, has so far raised over $13.2 million in less than two months. And, even with the bearish forces on the market being strong, it is impressive how much IMPT has managed to capture the attention of value-seeking investors who would also like to create better work.

As each stage of the IMPT presale goes on, the asset’s value rises. This means that the token holds a lot of untapped potential for gains. The digital asset trades at $0.023 but will move to $0.028 in the next phase.

For investors looking for the perfect ESG investment, IMPT is a good coin to buy.

Buy IMPT on Presale Now

Continue Reading

Cryptocurrency

IMF Seeks Stronger Regulation of Cryptocurrency in Africa as Adoption Takes Hold

Avatar photo

Published

on

The collapse of the FTX cryptocurrency exchange has attracted the attention of global regulators, including the International Monetary Fund (IMF). Before its demise, FTX was the third-largest cryptocurrency exchange by trading volumes, and it had a significant presence in developing countries.

IMF calls for crypto regulations in Africa after FTX collapse

In a recent statement, the IMF said that the demise of FTX and the dropping prices of Bitcoin, Ethereum, and other cryptocurrencies, have necessitated better regulations in the industry and consumer protection measures.

The global financial institution noted that crypto assets were highly volatile, and their decentralized nature made it challenging for most governments to regulate the industry. Therefore, there was a need to balance lowering the risk posed by the industry and supporting innovation.

It further noted that only a quarter of the countries in sub-Saharan Africa regulated cryptocurrencies. Moreover, two-thirds of these countries had implemented some restrictions. In contrast, another six, including Cameroon, Ethiopia, Tanzania, Lesotho, Sierra Leone, and the Republic of Congo, had imposed a total ban on cryptocurrencies.

On the other hand, Zimbabwe has mandated all the banks licensed to operate in the country to halt processing cryptocurrency transactions. Additionally, Liberia instructed a crypto startup that had started offering services in the country to halt operations.

Africa has become a main hub for cryptocurrency activities. Data from Chainalysis shows that the number of crypto transactions in the country has increased over the years. However, the size of crypto transactions in the continent is smaller than in other regions, with the monthly transactions peaking at $20 billion in mid-2021.

The highest number of crypto users in the region are in Kenya, Nigeria and South Africa. The majority of people in the region use cryptocurrencies to make commercial payments. However, the volatility of these assets makes them unsuitable for use as a store of value.

Policymakers have raised concerns about whether crypto assets can be used to make illegal transactions outside the region and to avoid the rules put in place to avoid capital outflows. The high use of cryptocurrencies in the region could reduce the effectiveness of the monetary policy, which poses a danger to financial and macroeconomic stability.

IMF concerned about the adoption of crypto as a legal tender

The IMF has also said that the cryptocurrency sector’s risks were higher if these assets were adopted as a legal tender, citing an example of the Central African Republic. The country became the second globally to adopt Bitcoin as a legal tender. According to the IMF, holding crypto assets as a means of payment puts public finances at risk.

The IMF has also added that adopting BTC as a legal tender in the Central African Republic has caused conflict between the country and the Bank of Central Africa States (BEAC), as it violates the institution’s treaty. Central Africa’s Banking Commission, which oversees the BEAC banking sector, has banned using cryptocurrencies for financial transactions.

Related

Dash 2 Trade – Next 100x Crypto

Dash 2 Trade

  • Early Access Presale Live Now
  • Power’s Crypto Analytics Ecosystem
  • Solid Proof Audited, CoinSniper KYC Verified
  • Trading community of 70,000+ members

Dash 2 Trade

Join our Telegram channel to stay up to date on breaking news coverage

author image

Author: Ali Raza

Ali is a professional journalist with experience in Web3 journalism and marketing. Ali holds a Master’s degree in Finance and enjoys writing about cryptocurrencies and fintech. Ali’s work has been published on a number of leading cryptocurrency publications including Capital.com, CryptoSlate, Securities.io, Invezz.com, InsideBitcoins, BeinCrypto, and more. …

View full profile ›

Continue Reading
Advertisement

Trending