Here's Why Crypto Is Down This WeekNov 18, 2021
To no one's surprise here at Moby, the Infrastructure Bill that was approved on Monday, caused a landslide of losses across cryptocurrencies.
Over $400 Billion was sold off from the entire $3 Trillion market cap in minutes, as Bitcoin and others hit monthly lows.
While the Infrastructure Bill was celebrated by many as it pours billions in roads, ports and powerlines, many crypto advocates actively criticized the new bill.
This is because the new bill puts tighter rules on handling cryptocurrencies and puts a spot light on reporting requirements.
Long story short, this creates more red tape, more costs and more road bumps aheads.
But this is likely just the first part of more regulation and roadblocks for the cryptocurrency going forward.
We're hope you're ready for a fight in the crypto political wars here in the US.
Let's break down what you need to know and what's coming next:
The first punch, and it’s a big one under the new law, goes after those who are involved in digital asset mining or staking, providing digital asset hardware or software wallets, or are developing digital asset protocols that may fall under the definition of “broker” for tax purposes.
- By becoming a "broker" these parties would then be subject to certain Internal Revenue Service (IRS) reporting requirements. For most of these parties, these new rules would be a massive headache. The headaches would largely amount to massive costs incurred and needs for new reporting systems. The language of “brokers” is extremely broad, and capturing miners and other parties that don’t actually facilitate transactions adds a ton of strain to the system.
The second huge punch is that new legislation requires digital asset transactions worth more than $10,000 to be reported to the IRS.
- We are unsure at this time if this will apply to both individuals and businesses, but again this is a ton of added stress on the system. This means that for anyone transacting in "large" amounts they'll have to report this, which costs money and time. With more friction, comes more headaches and slowing down of innovation. Therefore we're viewing both these events as overreactions and are against the heavy new burdens.
But we believe this fight isn't yet over. So, who’s in our corner fighting for crypto?
If you can count on one thing, it's death, taxes and money.
Wait, we actually said 3 things, so let's add one more to it: Politicians will argue to death.
And specifically they'll argue this crypto legislation back and forth for eternity. So let's get into who's pro vs. anti crypto:
- Senator Pat Toomey (R-PA): “The legislation is too expensive, too expansive, too unpaid for and too threatening to the innovative cryptocurrency economy”. Toomey called out the crypto tax reporting requirement as possibly “unworkable.”
- Senator Cynthia Lummis (R-WY) & Senator Ron Wyden (D-OR): The senators made a last ditch effort, to no success, to change the tax reporting requirements to “not apply to individuals developing blockchain technology and wallets.”
- Senator Wyden said, “Our bill makes clear that the new reporting requirements do not apply to individuals developing block chain technology and wallets. This will protect American innovation while at the same time ensuring those who buy and sell cryptocurrency pay the taxes they already owe.”
- Senator Lummis said, “Digital assets are here to stay in our financial system and the decisions we make now will have impacts far into the future. We need to be fostering innovation, not stifling it, if we are going to maintain America’s position as the global financial leader. I’m proud to introduce this bipartisan bill to ensure that our tax system reflects the realities of digital assets and distributed ledger technology."
While we're sure reading about politicians is putting you to sleep, the summary of this is that people are truly on both sides of the fence. And even when they're on the same side of the fence they're still arguing the best way to go about it too!
While these new rules don't go in affect in 2024, we don’t think this is the first or last round of this fight around cryptocurrencies. This is just one of many rules and regulation to come into affect going forward.
How To Play It:
Therefore we're continuing to add incremental purchases to our Bitcoin position at points of tension and think this is the best way to take advantage of the sell off!
While we don’t yet see any new legislation directly targeted to Bitcoin - all others (e.g. Ethereum, Cardano, Binance, to name a few) are now officially on #SEC watch.