Musings On Markets: The Bitcoin Boom: Asset, Currency, Commodity Or Collectible?
A trader who thinks he is trading based on value. A value investor who thinks he can reason with markets. As I see it, you can play either the value or pricing game well, but being delusional about the game you are playing, and using the wrong tools or bringing the wrong skill set to that game, is a recipe for disaster. The first step towards a serious debate on bitcoin then has to be deciding whether it is an asset, a currency, a commodity or collectible. Bitcoin is not an asset, since it does not generate cash flows standing alone for those who hold it (until you sell it). It is not a commodity, because it is not raw material that can be used in the production of something useful. The only exception that I can think off is that if it becomes a necessary component of smart contracts, it could take on the role of a commodity; that may be ethereum's saving grace, since it has been marketed less as a currency and more as a smart contracting lubricant. The choice then becomes whether it is a currency or a collectible, with its supporters tilting towards the former and its detractors the latter.I argued in my last post that Bitcoin is a currency , but it is not a good one yet, insofar as it has only limited acceptance as a medium of exchange and it is too volatile to be a store of value. Looking forward, there are three possible paths that I see for Bitcoin as a currency, from best case to worst case. The Global Digital Currency: In the best case scenario, Bitcoin gains wide acceptance in transactions across the world, becoming a widely used global digital currency. For this to happen, it has to become more stable (relative to other currencies), central banks and governments around the world have to accept its use (or at least not actively try to impede it) and the aura of Continue reading >>
Crypto: Asset Or Currency?
BOScoin is a Self-Evolving Cryptocurrency Platform(How do we value currency? How do we know a single dollar bill is really worth that? The answer is quite simple, because the government says so. One dollar is worth one dollar only as long as the government is willing, and able to defend its value, but before it gets to the point when the government needs to step in to defend its currency, people expect the government will defend their currency no matter what, so a minimum value of one dollar is formed for a single dollar bill! Now, lets think about the opposite situation. What happens if people regard a one dollar bill to be of more value than just a buck? The answer is still the same, it is only worth one dollar. Why? Again the same answer because the government says so. However, there is a slight difference the government is able to back up its claim simply by printing more currency. If demand for currency rises, what the government (or the central bank to be exact) needs to do is supply more currency. That is why in a growing economy there will always be some moderate inflation. The value of a currency is decided by the size of the economy (apart from the US dollar which functions as a base currency for other currencies) and the amount in circulation is controlled by the central bank in order to ensure stable growth. If too much currency is supplied, a more than desired inflation rate may hurt the economy, and if currency is not supplied enough, sluggish growth will hurt sentiment. Basically, currency value fluctuates relative to the size of the economy, and the supply and demand of currency is dependent on which direction the economy is taking. A clear example of this is the foreign exchange market. Exchange rates fluctuate every second because market participants Continue reading >>
Is Bitcoin A Currency Or A Commodity?
Bitcoin has quickly asserted itself as an alternative asset deserving of our attention, but if youre a stickler for details, the real debate is whether it is a currency, commodity or something else entirely. Up until recently, this debate wasnt given much thought. After all, cryptocurrencies are meant to solve many of the problems plaguing the current system of fiat money. Naturally, then, they are currencies. // -- Discuss and ask questions in our community on Workplace . Investability is one of bitcoins most defining characteristics. With a market cap of more than $160 billion, the cryptocurrency allows investors to take capital or gain exposure in meaningful ways. As mainstream adoption catches on, bitcoin investments will also make their way into traditional vehicles, such as ETFs and futures. In this vein, it has many of the same characteristics as commodities. Bitcoin is often called digital gold because it behaves very much like a commodity. As a divisible resource, it is considered portable, scarce, secure and durable. The following chart courtesy of BTCS provides a clear illustration of how bitcoin stacks up to the physical commodities gold and silver. // -- Become a yearly Platinum Member and save 69 USD and get access to our secret group on Workplace. Click here to change your current membership -- // Some investment circles are also beginning to treat bitcoin as a hedge against uncertainty. Although the author believes this is characterization is a tad premature, bitcoin has one characteristic that very few assets have: no correlation. To the authors knowledge, this feature was first identified by ARK Invest in its highly influential whitepaper Bitcoin: A disruptive Currency. Whereas most asset classes are correlated, bitcoins price is completely independen Continue reading >>
Crypto Tax Evasion; Bitcoin: Asset Or Currency; Investors Bullish
News Item 1: US Department of State Concerned Over Use of Cyber Currencies in Costa Rica for Money Laundering Decrypted:Every year, over $4 billion is laundered in Costa Rica , where a high degree of financial openness combined with the countrys growing role in the regional drug trade has created conditions ripe for money laundering. The strong appeal of cryptocurrencies is that they are beyond the reach of governments and regulators. This certainly introduces issues related to money laundering and the facilitation of illicit purchases. In the traditional banking system, a government can unrightfully lay claim to the assets of an individual or organization and seize them at the bank level, preventing access. A report by the US State Department outlines to Costa Ricas vulnerabilities when it comes to organized crime and money laundering: Transnational criminal organizations continue to employ Costa Rica as a base for financial crimes due to limited enforcement capacity and its location on a key transit and operations route for narcotics trafficking. Since the middle of 2017, there have been government efforts to regulate the market. The majority of these efforts have been centered on KYC and AML regulations. Our take:Money laundering is the process of making illegally-gained proceeds appear legal. Money laundering is huge and according to UNODC its estimated at 25% of global GDP, or $800 billion every year. Countries like France, South Korea, the United States, and even Japan have also made efforts to improve the KYC and AML rules in operation in the crypto markets of their respective countries. Know Your Customer (KYC) is the process of obtaining relevant identifying information about the customers of a service, like photo id, bank accounts or credit card information, Continue reading >>
What Do You Think Bitcoin Is: Commodity, Currency, Security Or Scam? | Btc | Benzinga
Elroy's Elliott Wave: Cryptocurrency Edition (Seeking Alpha) Bitcoin has been one of the hottest investments on Wall Street in 2017. But with the price of bitcoin up more than 1,600 percent and the Bitcoin Investment Trust (OTC: GBTC ) up 1,610 percent year-to-date, bitcoin remains one of the most polarizing investments out there. Investors not only disagree on where the price of bitcoin is headed next, regulators and market experts cant even agree on what exactly bitcoin is. In the recent special bitcoin episode of Benzinga PreMarket Prep, Joe Saluzzi, partner and co-founder of Themis Trading, discussed the dilemma facing bitcoin investors and regulators. I think one of the reasons regulators are struggling here is they dont know what it is, Saluzzi said. They dont know how to classify bitcoin. For instance, the CFTC may have said it is a commodity, but the SEC is leaning more toward a security. If its a security, then it must be regulated like a security. Related Link: Does Bitcoin Actually Hold Any Value At All? Bitcoin has certain characteristics that are similar to typical commodities, such as gold. Some argue bitcoin is useful and holds inherent value, which could make it a commodity. It also trades on the futures market, like other commodities. However, others argue bitcoins only value is in the minds of its buyers, since the digital currency is merely a series of 1s and 0s. Bitcoin also meets some requirements of the standard definition of a currency. Bitcoin is certainly a medium of value exchange, but it is not backed by a government and its volatile swings in value are certainly atypical for a currency. Some argue that bitcoin is a security, or an investment contract with implicit or explicit ownership terms. Cryptocurrencies are often discussed in terms of Continue reading >>
Kevin O'leary: Bitcoin Is An Asset Not A Currency
With the recent frenzy around the staggering rise in the price of bitcoin , which briefly reached a high of $19,340 trading on the Coinbase exchange on Thursday, "Shark Tank" star and investor Kevin O'Leary wants to make one thing about the cryptocurrency crystal clear. It isn't a currency. It's just too volatile for that. "I don't consider it a currency and I'll tell you why," O'Leary tells CNBC Make It . He recalls an experience that taught him firsthand the problem with bitcoin's volatility. "I recently tried to settle a transaction for around $200,000 with bitcoin. It was an international transaction with a European entity and I suggested, 'Why don't we try bitcoin?'" O'Leary explains. The benefit of using bitcoin would be to eliminate the hassle of exchanging currencies and clearing the money through banks. "The whole idea of bitcoin as a currency is you don't have to do any of that," O'Leary says. "You just buy $200,000 of bitcoin and then send it to them." Then he hit a snag. The Europeans he'd be paying wanted O'Leary to guarantee the value of the bitcoin against the price of the U.S. dollar. "In other words, I have to insure [the bitcoin] because it is, as you know, very volatile," O'Leary says. The Europeans certainly had a reason to be concerned, bitcoin has seen wild swings in recent days. After it hit over $19,000 trading on the Coinbase exchange, it then fell more than 20 percent to just above $15,000. Tuesday, the price had just topped $12,000. The problem? Imagine O'Leary paid his European counterparts the equivalent of $200,000 on Thursday when the price of bitcoin was trading at $19,000 that would be roughly 10.53 bitcoin. Later that very day, the same 10.53 bitcoin were worth just over $160,000. O'Leary decided he didn't want to take on the risk of t Continue reading >>
Basic Facts You Should Know About Bitcoin
Basic Facts You Should Know About Bitcoin In early 2017, Bitcoin rose to an all-time high of $1129.87 on January 4. It continues to rise in astronomical numbers. Just one year before, Bitcoin was at the $434 level. Bitcoin is a form of digital currency. It is created and held electronically, on a computer. Bitcoins are not paper money like dollars, euro or yen by central banks or monetary authorities. Bitcoin is the first example of a cryptocurrency, which is produced by people and businesses all over the world using advanced computer software that solves mathematical problems. Satoshi Nakamoto first proposed Bitcoin as a means of payment based on mathematics. Bitcoin is a method of payment or transfer of value that is independent of governmental authorities like central banks that traditionally control money supply and the availability of currency in the global market. In many ways, Bitcoin is a pan-global means of exchange. Transfers are made via computer immediately with low transaction fees. Bitcoin does not flow through the traditional banking system; rather it flows from one computer wallet to another. Bitcoin cannot be held or kept in a pocket or wallet like currency; it is purely a computer-based means of exchange. Bitcoin is a fixed asset; there is only a total of 21 million coins. Solving the advanced mathematical problems results in the mining of Bitcoins. However, bitcoin is divisible so the growth potential for the exchange medium is unlimited. One of the most interesting inventions that came alongside Bitcoin is blockchain or distributed ledger technology (DLT). DLT has amazing potential when it comes to traditional operations and settlement ramifications for businesses in the financial as well as other industries. DLT tracks ownership and allows for imme Continue reading >>
Bitcoin Is A Speculative Asset But Not Yet A Systemic Risk - A Bit On The Side
The usual tools of finance are no guide. An equity is a claim on the assets and the profits of a firm; a bond entitles the investor to a series of interest payments and repayment on maturity. Bitcoin brings no cashflows to the owner; the only return will come via a rise in price. When there is no obvious way of valuing an asset, it is hard to say that one target price is less likely than another. Bitcoin could be worth $10 or $100,000. Instead, investors must weigh the scenarios that enthusiasts posit: what if, say, every pension fund invested 1% of its portfolio in the cryptocurrency? One argument made by bitcoinnoisseurs is that it is a type of digital gold. Stores of value are supposed to keep their value; bitcoin, by contrast, is extremely volatile. Its code ensures that no more than 21m coins can ever be created; that sets bitcoin apart from fiat money, which central banks can create at will. Yet being limited in supply is a necessary, but not sufficient, condition for having value; signed photographs of Economist journalists are rare but, sadly, of negligible worth. Nor is supply really limited. Plenty of other cryptocurrencies exist. Might bitcoin replace ordinary currencies in everyday transactions? Not soon. Who wants to part with (or accept in exchange) a currency that can rise or fall by 20% in an hour? And true currencies are used to denominate liabilities as well as assets; imagine the ruin faced by those who had taken out a bitcoin mortgage or business loan earlier this year. Bitcoin might triumph if currencies like the dollar and the euro succumb to hyperinflation, but there is no sign of that. A more likely scenario is that the technology that underpins bitcoina distributed ledger called the blockchainproves so useful that it becomes widely adopted. If Continue reading >>
Israel To Tax Bitcoin As An Asset, Not A Currency - Business - Haaretz.com
Israel to Tax Bitcoin as an Asset, Not a Currency Cryptocurrencies aren't money and will be taxed like any other investment, tax authority decides Bitcoin looks like a bubble, warns Israel Securities Authority chief Bitcoin isnt a currency and people buying and selling the cryptocurrency will be subject to tax, the Israel Tax Authority said Monday in an updated circular. As a result, profits made on cryptocurrencies will be subject to the ordinary 25% capital gains tax for private investors to a 47% marginal rate for businesses, the authority said, instructing investors to report on their holdings within 30 days and arrange prepayment of tax. The decision came after the authority issued its draft circular on bitcoin taxation, which similarly discounted claims that bitcoin and its peers are currencies, no different from the shekel or dollar, whose profits are not taxed. In addition, the tax authority had never issued a final ruling on whether the sellers of cryptocurrencies were liable for the 17% value-added tax. On Monday it clarified that only businesses would be liable for the tax, not individuals, because, as the circular explained, bitcoin is an intangible asset used for investment purposes only. Shahar Strauss, a tax lawyer with the Tel Aviv firm Ziv Sharon & Company, said he had clients who had invested small sums in bitcoin years ago and today their holdings are worth tens of millions of shekels, after the big run-up in the cryptocurrencys value. They are now liable for taxes in the millions of shekels, he said. Continue reading >>
Bitcoin Is An Asset, Not A Currency - Israel's Central Bank
January 8, 2018 / 1:18 PM / 2 months ago Bitcoin is an asset, not a currency - Israel's central bank JERUSALEM (Reuters) - Israels central bank said on Monday it would not recognise virtual currencies such as bitcoin as actual currency and that it was difficult to devise regulations to monitor the risks of such activity to the countrys banks and their clients. Deputy Governor Nadine Baudot-Trajtenberg said there had been public complaints Israeli banks were making it difficult for some customers to transfer money from their accounts to buy bitcoin. But this was something the central bank would not be able to address. Other central banks faced the same problem. The Bank of Israels position is that they should be viewed as a financial asset, Baudot-Trajtenberg told a meeting of Israels parliamentary finance committee, noting that there was no government responsibility for investors in bitcoin. The central bank, Baudot-Trajtenberg said, was studying the issue of virtual currency but not much could be learned from what exists globally since no regulator anywhere in the world had issued guidelines to the banking system on how to act in relation to customers activity in virtual currencies. There is a real difficulty in issuing sweeping guidelines to the system regarding the proper way to estimate, manage, and monitor the risks inherent in such activity, she said. Beyond the risks to the customer there are also compliance risks to the bank. The value of a bitcoin, the biggest and best-known cryptocurrency, surged in mid-December to nearly $20,000, then dropped to less than $12,000 at the end of the month. It was trading on Monday around $15,370. Bitcoin is a publicly available ledger of a finite number of digital coins, which backers say can be used as a currency without the Continue reading >>
Bitcoin Is Failing As A Currency
It's been a good year for bitcoin investors but a terrible one for those who hoped that the cryptocurrency would become the de facto tender for the internet. Satoshi Nakamoto, its creator, may be dismayed at what has become of the project, intended as peer-to-peer electronic cash that didn't require the supervision of banks. Instead, bitcoin has become an investment vehicle, embraced by many on Wall Street, an asset class like every other. For all the success of the blockchain and bitcoin's soaring value, it's clear that Nakamoto's original vision has failed. Historically, people needed a way of storing their money in manners more sophisticated than stuffing their mattresses. The practice was to buy precious metals -- like gold -- and hope that it would retain, and appreciate in, its value over the years. But as economies grew and society matured, it was necessary to move toward fiat currencies, which weren't intrinsically valuable in and of themselves. Bitcoin was Nakamoto's deliberate attempt to undo this by building a digital equivalent to gold. And boy, did it work. In the past 12 months , the value of bitcoin has risen from a low of $777.91 up to a high of $17,178. The currency has always been volatile, but for a while its ceiling was around the thousand-dollar mark. Prices began to surge in the second half of this year, and TechCrunch's John Biggs believes that this new surge was entirely due to the investment community . On Dec. 10th, CBOE Global Markets began offering investors the chance to bet on the future health of bitcoin in the same way they can for any other futures market. This surge in interest from the investment world is helping to elbow out any hope that bitcoin will mature into a method of exchange. Currencies need to remain broadly stable in their Continue reading >>
Bitcoin Currency Or Asset?
University of Technology, Sydney - Finance Discipline Group; Financial Research Network (FIRN) Bitcoin is defined as digital money within a decentralized peer-to-peer payment network. It is a hybrid between fiat currency and commodity currency without intrinsic value and independent of any government or monetary authority. This paper analyses the question of whether bitcoin is a currency or an asset and, more specifically, what is its current usage and what usage will prevail in the future, given its characteristics? We analyse the statistical properties of bitcoin and find that it is essentially uncorrelated with traditional asset classes such as stocks, bonds and commodities, both in normal times and in periods of financial turmoil. The analysis of transaction data of bitcoin accounts shows that bitcoins are mainly used as a speculative investment and not as an alternative currency and medium of exchange. Bitcoin is still small relative to the size of other asset classes and, thus, does not pose an immediate risk for monetary, financial or economic stability. Baur, Dirk G. and Hong, KiHoon Jimmy and Lee, Adrian D., Bitcoin Currency or Asset? (November 2015). Melbourne Business School, 2016 Financial Institutions, Regulation & Corporate Governance (FIRCG) Conference. Available at SSRN: Continue reading >>
Is Bitcoin A Currency Or An Asset?
Economy /31 January 2018, 10:30am/Staff Reporter CAPE TOWN - Cryptocurrency is under increasing scrutiny, following its gains over the past four years. We take a look at what South African's should prepare themselves for, if and when the tax on bitcoin is introduced. According to regulations by the Reserve Bank, cryptocurrency, Bitcoin is subject to general tax principles. However, the cryptocurrency does not have legal-tender status. Corporate tax consulting at public accounting, tax, consulting and business advisory firm BDO, Marcus Botha said in October last year that the South African Reserve Bank (Sarb) does not consider cryptocurrencies as legal tender. "Cryptocurrencies are not subject to the regulations of the Reserve Bank, as the position paper they released on virtual currencies states that the cryptocurrency does not have legal-tender status. Until further clarity and formal regulation, Sars will apply general tax principles and tax the income or capital gains that are received or accrued to a taxpayer", said Botha. The South African Revenue Service has however indicated that it will decide upon a tax regulation for cyptocurrencies by the beginning of this year. What remains a concern, however is under what jurisdiction bitcoin will fall under. Under certain jurisdictions, bitcoin is considered an asset while other jurisdictions considerit a currency. Continue reading >>
Israel Will Tax Bitcoin As An Asset, Not A Currency
The Israel Tax Authority announced that Bitcoin as well as other cryptocurrencies would be treated as a kind of assets for tax purposes. This move was not a very surprising one, as recently the Bank of Israel has refused to recognize cryptos as currencies So, cryptocurrencies are not considered to be money and people who buy and sell them will be subject to tax as in cases with any other investments. The Authoritys position regarding cryptocurrencies was initially mentioned in January and now it was officially confirmed. Profits of investors in Bitcoin or other virtual coins will be subject to capital gains tax at rates ranging from 20% to 25%. But its important to notice that individuals mining or trading cryptocurrenciesfor business purposes will have to pay not only capital gains taxes but also a 17% value added tax (VAT). According to the Authoritys requirements, all cryptocurrency transactions should be documented for possible audit. In order to be able to present relevant evidence for an audit, the taxpayer must prepare documents confirming the transaction in the decentralized means of payment, and consequently verify the existence of this transaction and its monetary volume, as well as data of the accounts through which the fund were transferred. Moreover, the seller must also present the evidence of the transaction attaching the pages of the bank accounts through which the funds were transferred or at least a computer screen capture demonstrating the sale and purchase and the date/time of the operation. These are not the only limitations for crypto market in Israel. Last week it was announced that companies whose value is based on the value of the Bitcoin shouldnt be included in one of the Tel Aviv Stock Exchange (TASE) indices. The Israel Securities Authority Continue reading >>
Bitcoin: An Asset, Currency Or Collectible?
Bitcoin: An Asset, Currency Or Collectible? Opinions expressed by Forbes Contributors are their own. LONDON, ENGLAND - OCTOBER 23: A visual representation of the digital Cryptocurrency, Bitcoin on October 23, 2017 in London, England. Cryptocurrencies including Bitcoin, Ethereum, and Lightcoin have seen unprecedented growth in 2017, despite remaining extremely volatile. While digital currencies across the board have divided opinion between financial institutions, and now have a market cap of around 175 Billion USD, the crypto sector coninues to grow, as it sees wider mainstreem adoption. (Photo by Dan Kitwood/Getty Images) For a digital asset that began its life in 2009 and began the year trading around $1,000, the fact that Bitcoin is set to break the $10,000 ceiling is certainly impressive. Other than the many celebrations that will surely follow this milestone, interspersed with a mix of investor remorse or Casandras calling this the digital twin of Tulip Mania , many questions remain about the advantages and disadvantages of digital assets. Crypto numismatists who have been collecting Bitcoins are surely happy these days. Investors and early adopters like these assets because they are untethered from the regular economy where fiat currencies, more traditional forms of exchange and value transfer reign the day. It is not without a sense of irony that part of Bitcoins rapid ascent this year is owed to the fact that traditional economy players are now paying close attention to this asset class. While some of this attention remains negative, profoundly confused or ambivalent, such as China and South Korea banning initial coin offerings (ICOs), along with ongoing attempts to regulate a fundamentally decentralized platform. Add to these negative views Jamie Dimons full-th Continue reading >>