Good riddance!
April is often a good month to buy some crypto, and a big reason for that is tax season. Taxes come around and everyone does them at the last second... in fact I'm writing this post right now because I saw people on Twitter confirming they had just finished their taxes... on the very last day to file them. I would not even have mentally registered it was April 15th deadline today had I not seen these posts. At first I was like, "Why are people talking about taxes? Oh... lol." Classic procrastinators. Do your taxes earlier next time. Seriously though.
Who remembers 2021 NFT bull market?
Volatility is the real killer
Tax season particularly sucks for crypto users because everything is unregulated and there are very few tools out there that can actually help you figure out how much you owe (if any). And even if you don't owe anything you're still legally supposed to report every single buy and sell, which is tedious AF if you don't have software to actually navigate the situation in an automated fashion. Imagine having to report on thousands of trades just to confirm that you in fact lost a ton of money that year. Crypto users are forced to do this all the time, and it's a huge hassle and waste of time.
Volatility is the real killer though
The reason why crypto is so brutal sometimes is that bull markets usually come in Q4 of the year, but the fiscal year ends when Q4 becomes Q1 (January). So you might have made a ton of money in Q4, but then re-traded all those gains into alts in Q1... then when you inevitably lose all the the money the tax man comes and demands their cut of assets that don't even exist anymore.
All I can say is if you're going to take gains at the end of the year... make damn sure you keep a bag of stables to avoid this exact doomsday scenario... as it is possible to be taxed more than your net-worth in this way due to the volatility of the bull market year transitioning into the bear market year. I've seen it happen and it's not even that uncommon.
Getting rugged is another way of getting completely screwed.
Because when you get rugged the IRS just decides that this is not a tax event. You can't declare a loss on getting rugged/robbed so if you owed taxes and then lose everything you still technically owe taxes. The "I lost it in a boating accident" doesn't work here.
Fun stuff.
Poor people get wrecked!
And now would be a good reminder to point out that the IRS often targets the lower and middle class. Why would they do this when it's the rich that have all the money? Because the rich people control the system, and even if they do get attacked they have the resources to lawyer up and defend themselves, whereas everyone else is just kind of defenseless, making them ironically higher value targets than the ultra wealthy who already know exactly how to navigate the financial landscape.
This is a message I get from Coinbase every year.
Remember that ridiculous law that forces all companies to report anyone who made $600 or more in a year? Yes, well, there's a loophole. Because guess what I'm full time crypto and funnel thousands of dollars worth of dollars though Coinbase every year to pay my monthly bills, and they still don't report me.
Why is that?
Because I don't trade on Coinbase, and neither should anyone else because it's not only expensive but also violates your financial privacy. When I move crypto to Coinbase I sell it immediately, and because Coinbase has no idea if I made or lost money on that trade their system just zeros it out in the books so it always looks like I've earned $0 every year on paper. This is the correct way to maintain your financial privacy when it comes to being reported.
And this is not to say that a person should engage in felony tax evasion just because they don't get reported to the IRS; only that it's smarter to maintain your privacy so that the IRS isn't constantly looking over your shoulder and waiting for you to fuckup. It's like driving on the road with a cop behind you; the cop can pull you over for literally any reason, as every single person on the road breaks the law as the standard.
(Unless you are driving on a non-civilian military base)
Nobody comes to a complete stop at a stop sign. Nobody drives below the speed limit; everyone is breaking the law all the time. Which is exactly what the establishment wants so they can pick and choose when they want to enforce the law; it gives them an obscene amount of subjective arbitrary power to allow it to be this way.
It's the exact same with crypto.
I'm not legally allowed to trade on margin, but I do it anyway because I have access to non-kyc exchanges. DEFI allows us to do things that previously only banks had the authority to do. It's inevitable that crypto users will also break the law without even knowing it, so it's best to not have the cop driving behind you and maintain privacy.
Remember when everyone laughed at Bitcoin?
How the government is straight up arresting people in other countries like Roger Ver and saying, "Where's muh Bitcoin bitch you've been hiding your corn from me!"
Privatize the gains socialize the losses.
Governments get more and more bloated every year. Inefficiency and incompetence run rampant. And who pays for this incompetence? The taxpayer. I have no doubt that taxes will continue to increase as citizens become more and more burdened by the corruption of their own government. At least with crypto we get to choose whether we're going to give it to them or not, as the value existing anywhere else can be seized or frozen within the legacy financial markets; be it real estate, stocks, bonds, or a savings account.
This is why physical cash should be more respected this day in age. While a little less convenient, physical cash is the one thing that Bitcoin never can be, and tends to be more private as well as the bills are less easily tracked until they cycle through a bank.
Conclusion
Well this was a bit of a disjointed rant but you get the idea. Always maintain your privacy. The "you should have nothing to hide" argument is a farce. Privacy is a constitutional right, and technology has allowed the government to slowly subvert their own rules for generations. Luckily crypto is a technology that can increase privacy rather than degrade it. Unfortunately Monero is beyond the scope of this post so I may have to dedicate a post soon to privacy coins specifically.
- Never trade crypto on the exchange you use as a ramp to fiat.
- Sign up for non-kyc exchanges.
- Use a VPN.
- Don't degen trade your gains after a end-of-year tax event.
- Don't trust government agencies have the best intentions.
- A million laws exist so that we are always breaking at least one.
- The lower classes are ironically the biggest monetary targets.
- Privacy is a basic right, not a crime.