Ihaveasurefireway of using bitcoin BTCUSD, +2.95%, ethereum ETHUSD, +2.29% and other digital currencies to finance your retirementbut I cant recommend it.
Go out and buy a bunch of bitcoin (or other digital currencies), get a receipt, and then immediately sell them. Keep the receipt.
Then, when these currencies next collapse in price, as they are highly likely to do, go out and buy a bunch more. Immediately sell the ones youve just bought, and get another receipt.
You will now have two receipts. One will show you bought a ton of bitcoinor whateverwhen the prices were up high, as they are right now. The other will show you sold the same amount of Bitcoins when it was much cheaper.
So long as you are careful not to leave any documentary proof of the other two transactions, you can then claim these fictional losses on your tax return. The IRS considers these digital currencies as property or investments, and taxes them as such.
You can use these losses to shelter any other (real) capital gains, and up to $3,000 a year of income, from tax. Savings? As much as you can claim.
Sure, if you get caught, youll probably go to jail for tax evasion. Im not recommending it. But Im passing the information on.
(By the way, if the IRS audits you, I can only quote the Miami Heralds Dave Barry in similar circumstances. If you follow my advice, and the IRS asks you where you got your information, he told readers, remember to give them my full name, George Will.)
OK, so technically this maneuver is illegal. But, hey, maybe you wont get caught.
And anyway, since when has whats legal mattered to investors in bitcoin or other digital currencies?
The number one utility of cryptocurrencies is breaking the law. Digital currencies are fabulous vehicles for financing terrorism, drug deals, child pornography, murder for hire, money laundering, and pretty much anything else that is illegal but which you could in theory pay for online.
A study in the Review of Financial Studies found that about half of all bitcoin transactions world-wide were associated with criminalactivities. We find that approximately one-quarter of bitcoin users are involved in illegal activity, the researchers found. We estimate that around $76 billion of illegal activity a year involves bitcoin (46% of bitcoin transactions), which is close to the scale of the U.S. and European markets for illegal drugs.
For anyone who wants to take part in legal online transactions, there are much simpler mechanisms than buying cryptocurrencies and setting up virtual wallets. You can just useeryour debit card and bank account. And things like Google Pay and Apple Pay and PayPal PYPL, -4.56%.
Yet digital currencies are now becoming so popular as investments that you can hold them in a variety of individual retirement accounts. I received yet another news release the other day about a company allowing us to hold cryptocurrencies in IRAs.
Meanwhile hedge-fund manager Paul Tudor Jonesnot to be confused with Tenpole Tudorwaspromotingbitcoin on CNBC recently as an inflation hedge and comparing it with the great technology investments of the past.
Its like investing with Steve Jobs and Apple, or investing in Google early, he said. His rationale? bitcoin has this enormous contingent of really smart, sophisticated people who believe in it, he said. Youve got this group of peoplewho are dedicated to seeing bitcoin succeed and becoming a commonplace store of value.
He added, Ive never had an inflation hedge where youve had a kicker where youve also had great intellectual capital behind it, so that makes me even more constructive on it.
Its not clear how much Tudor Jones had invested in bitcoin when he went on TV to talk it up. Ive reached out to his public relations team for clarification, but they declined to comment. Tudor Jones said during the interview he had a small single digitsor is it, small, single digits?allocation to the cryptocurrency. A small single digits allocation might be as little as 1%. On the other hand, a small, single digits allocation could be pretty much anything below 10%.
His firm, Tudor Investment Corporation, manages around $8 billion in assets,sothat could potentially be anywhere up to nearly $800 million in the cryptocurrency.
Tudor Jones arguments about bitcoin are interesting. Some might reply that Apple AAPL, -5.60% and Google GOOG, +3.43% didnt succeed simply because they had a lot of smart people behind them, but because they provided great products and services thatconsumers loved. Nokia NOK, +0.59%, BlackBerry BB, -2.60%, Yahoo and the like also had lots of smart people working for them, and it didnt save the stockholders.
Actually, there were lots of really, really smart people working at Enron, too.
It is a perennial argument of bitcoin champions that it must be a wonderful investment because the technology is so amazing. It reminds me of the old joke about the inventor who created a really clever device for scrambling eggs inside the shell. Yes, its very clever, but why do I need it?
Is bitcoin a credible inflation hedge? Sure, if you fear that the U.S. dollar is going to lose purchasing power, many things that arent dollars will be inflation hedges. Ditto real estate DWRTF, -0.41%, timberland, gold GOLD, +2.14%, art, wine, euros EURUSD, +0.26%, yen USDJPY, -0.00%, energy futures, and possibly luxuries like Rolex watches.
But what inflation are we talking about?
Gasoline, clothing and some other prices are falling. But in the past12months, used car and truck prices have risen 10%. Foods up 4% and medical services 5%. Housing prices in the suburbs are up and apartment rents in the city are falling. Which ones do we want to hedge?
The official overall consumer-price index has risen 1.4% in the past year. The bond market is predicting it will rise about 1.6% a year over the next five.
Meanwhile, a look at the price for digital currencies shows the obvious issue. Take a look at our chart. It shows the price of bitcoin adjusted for the official consumer-price index.
Even since bitcoin went mainstream, in 2017, there has been no correlationnonewith the CPI. The real, inflation-adjusted value fell nearly 80% at one point, and thats just looking at month-end prices and ignoring the even greater volatility when you count daily prices. (Actually there was no correlation before it went mainstream in 2017 either.)
Hold bitcoin in an IRA and you wont have to pay capital-gains taxes on any profits, although you will have to pay ordinary income tax on the money you eventually withdraw from the account. But if you hold bitcoin in an IRA, whether a pretax traditional IRA or a posttax Roth IRA, and you wont be able to claim any losses on your taxes either.
Thebest casefor holding digital currencies in an IRA is that you wont have to track and report every single transaction on your tax return every year. That alone is valuable. On the other hand, you dont have to own the digital currencies at all.
The rest is here:
Want to retire rich on bitcoin? - MarketWatch
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- Bitcoin can top $150000 in the next 12-18 months, says Fundstrat's Tom Lee - CNBC - March 10th, 2024 [March 10th, 2024]
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- Bitcoin spikes above $70K, a record high, before fading - Yahoo Finance - March 10th, 2024 [March 10th, 2024]
- Bitcoin Ordinals Wallet Oyl Raises $3M With Arthur Hayes, BRC-20 Creator Domo Among Investors - CoinDesk - March 10th, 2024 [March 10th, 2024]
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- Here's why gold, bitcoin and stocks are all hitting new highs - Yahoo Finance - March 10th, 2024 [March 10th, 2024]
- Bitcoin vs. Ethereum: Which Is the Better Buy? - U.S News & World Report Money - March 10th, 2024 [March 10th, 2024]
- Crypto Analyst Predicts Bitcoin Could Surpass $330000, Breaking Historical Growth Patterns Markets and Prices ... - Bitcoin.com News - March 10th, 2024 [March 10th, 2024]
- Bitcoin is running out of enemies - Fortune - March 10th, 2024 [March 10th, 2024]
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- Bitcoin tops $68,000 as it nears 2021 all-time high - CNBC - March 10th, 2024 [March 10th, 2024]
- BlackRock's Global Allocation Fund Eyes Spot Bitcoin ETFs, Expects Institutional Uptake to Drive BTC Above $600k - TradingView - March 10th, 2024 [March 10th, 2024]
- FT Cryptofinance: This time isn't different for bitcoin rally - Financial Times - March 10th, 2024 [March 10th, 2024]
- Coinbase Stock vs. Bitcoin: Which Should You Invest In? - Yahoo Finance - March 10th, 2024 [March 10th, 2024]
- ETC Group CEO on Bitcoin's wild ride to a new high and why Ethereum could be the next big thing - Yahoo Finance - March 10th, 2024 [March 10th, 2024]
- Miners continue money-conscious moves ahead of the Bitcoin halving - Blockworks - March 10th, 2024 [March 10th, 2024]
- Warren Buffett's danger to Apple, the truth about Bitcoin's record, and Nvidia's bubble: Markets news roundup - Quartz - March 10th, 2024 [March 10th, 2024]
- Warren Buffett Says He Wouldn't Pay $25 For All The Bitcoin In The World He Considers Crypto 'Rat Poison' And ... - Yahoo Finance - March 10th, 2024 [March 10th, 2024]
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- Bitcoin Hit a Record High. Here's What Might Happen Next - CoinDesk - March 10th, 2024 [March 10th, 2024]
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- Bitcoin down 20% since ETFs approval, but may still see record high this year - MarketWatch - January 25th, 2024 [January 25th, 2024]
- Bitcoin briefly falls below $39,000 as post-ETF selling pressure continues - CNBC - January 25th, 2024 [January 25th, 2024]
- Bitcoin trims its losses after breaking below $39,000 to lowest level in 7 weeks - CNBC - January 25th, 2024 [January 25th, 2024]
- Bitwise publishes bitcoin ETF holdings address after on-chain sleuths uncover BlackRock's - Blockworks - January 25th, 2024 [January 25th, 2024]
- AI Agents Are Coming For CryptoPalantir Cofounder Issues Very Important Bitcoin, Ethereum, Solana And XRP Price Prediction - Forbes - January 25th, 2024 [January 25th, 2024]
- This Investing Phenomenon Could Be Why Bitcoin Prices Are Down After ETF Approval - Money - January 25th, 2024 [January 25th, 2024]
- Bitcoin Under $39K as ETF Debut Continues to Be a Sell-the-News Event - CoinDesk - January 25th, 2024 [January 25th, 2024]
- Blockchain, the tech behind bitcoin, may have found its 'killer use case' by keeping AI in check - CNBC - January 25th, 2024 [January 25th, 2024]
- Why Aren't There Options on the New Bitcoin ETFs Yet? - The Wall Street Journal - January 25th, 2024 [January 25th, 2024]
- Bitcoin ETFs to Likely Divert Users and Trading Volumes Away from CEXs, Says Anthony Bevan Bitcoin News - Bitcoin.com News - January 25th, 2024 [January 25th, 2024]
- Retail investors are worried bitcoin will plunge below $20000 this year, Deutsche Bank survey says - CNBC - January 25th, 2024 [January 25th, 2024]
- China's Currency Woes to Weigh on Bitcoin: Crypto Observer - CoinDesk - January 25th, 2024 [January 25th, 2024]
- Bitcoin ETF fee war spreads to Europe - Financial Times - January 25th, 2024 [January 25th, 2024]
- Bitcoin Bulls Buoyed by Report of FTX's $1B GBTC Sale - CoinDesk - January 25th, 2024 [January 25th, 2024]
- Despite the Bitcoin ETF Hype, Survey Says Investors Are Still Skeptical - Barron's - January 25th, 2024 [January 25th, 2024]
- Bitcoin ETFs aren't giving crypto a big boost just yet. Here's where the new funds stand - CNBC - January 25th, 2024 [January 25th, 2024]
- Why Bitcoin's 'relentless' selling will end in weeks - DLNews - January 25th, 2024 [January 25th, 2024]
- Bitcoin recovers above $40k amidst GBTC outflows, other ETF inflows - CryptoSlate - January 25th, 2024 [January 25th, 2024]
- These two drivers will fuel Bitcoin's rebound: 'It's happened often before' - DLNews - January 25th, 2024 [January 25th, 2024]
- Top Analyst Says 600 Days of Bullish Momentum Still Ahead for Bitcoin - The Crypto Basic - January 25th, 2024 [January 25th, 2024]
- Bitcoin Funds Are Here. But You Probably Dont Need Them. - The New York Times - January 25th, 2024 [January 25th, 2024]
- Bitwise releases wallet addresses of spot Bitcoin ETF holdings - Cointelegraph - January 25th, 2024 [January 25th, 2024]
- Mt. Gox Moves Seemingly Closer to Bitcoin Repayments For 2014 Hack Victims - CoinDesk - January 25th, 2024 [January 25th, 2024]
- Coinbase faces headwinds as Bitcoin and ETF interest dips, says JPMorgan - crypto.news - January 25th, 2024 [January 25th, 2024]
- Waning Bitcoin ETF Hype to Drag on Coinbase, JPMorgan Says - Yahoo Finance - January 25th, 2024 [January 25th, 2024]
- Bitcoin Price At Make-Or-Break Moment, Key Levels To Watch - NewsBTC - January 25th, 2024 [January 25th, 2024]
- Bitcoin Mid-Cycle Top? Benjamin Cowen Says One Indicator Suggesting BTC Headed for Downtrend - The Daily Hodl - January 25th, 2024 [January 25th, 2024]
- Franklin Templeton expects its spot bitcoin ETF to gain traction as financial advisors become more familiar with product - The Block - January 25th, 2024 [January 25th, 2024]
- Bitcoin ETFs: The Good, the Bad and the Ugly - RealMoney - January 25th, 2024 [January 25th, 2024]
- Cathie Wood Thinks Bitcoin Could Skyrocket 3,356% By 2030. Is She Right? - The Motley Fool - December 19th, 2023 [December 19th, 2023]
- JPMorgan says ether to outperform bitcoin next year - The Block - Crypto News - December 19th, 2023 [December 19th, 2023]
- XRP Beats Bitcoin, Ethereum in Weekly Fund Flows, Boasts $2.7M Inflow - The Crypto Basic - December 19th, 2023 [December 19th, 2023]
- Bitcoin Must Hold $32K Support to Prevent Bears from Taking Over: Analyst - CryptoPotato - December 19th, 2023 [December 19th, 2023]
- BlackRock Has Quietly Opened The Door To A Trillion-Dollar Plus Wall Street Game-Changer Amid The $700 Billion Bitcoin, Ethereum, XRP And Crypto Price... - December 19th, 2023 [December 19th, 2023]
- Bitcoin Bounces Over $43K, Altcoins, Crypto Stocks Burst Higher as Fed Projects Rate Cuts Next Year - CoinDesk - December 19th, 2023 [December 19th, 2023]
- 10 Best Bitcoin Stocks To Invest In - Yahoo Finance - December 19th, 2023 [December 19th, 2023]
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- 'Bitcoin Millionaire' Found Dead a Week After Going Missing - Decrypt - May 31st, 2023 [May 31st, 2023]
- US Debt Crisis: Gold and Bitcoin to Soar, Predicts Gromen - CryptoGlobe - May 31st, 2023 [May 31st, 2023]
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- At bitcoins annual convention, few feel the chill of crypto winter - Marketplace - May 31st, 2023 [May 31st, 2023]
- Bitcoin Association for BSV to Serve as Steward of Bitcoin Protocol - PR Newswire - May 31st, 2023 [May 31st, 2023]
- Former Operator of Payza.com Charged with Laundering 450 Bitcoin - Department of Justice - May 31st, 2023 [May 31st, 2023]
- Bitcoin is on a collision course with 'Net Zero' promises - Cointelegraph - May 31st, 2023 [May 31st, 2023]
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- ChatGPTs Bitcoin Price Prediction is $35,000, Also Backing Wall ... - Finbold - Finance in Bold - May 31st, 2023 [May 31st, 2023]
- best-bitcoin-casinos-for-2023-top-rated-btc-casino-sites - Analytics Insight - May 31st, 2023 [May 31st, 2023]