BITCOIN

User232002

Aegis said:

[Deleted User] said:

A new CNBC survey shows that 83% of Millennial millionaires now own crypto. Nearly 1/3 of the respondents have put at least 3/4 of their wealth in the assets.

Seems to be that only MSE "veterans" reject Bitcoin/crypto. It's not the case the new generation, who will eventually replace them.

In the meantime, all "veterans", enjoy your 0.25% PA in your savings account.

Happy New Year to all who are not afraid!

As I reject crypto, I guess I must be one of those veterans.  I certainly wouldn't accept 0.25% as a return rate, which is why my ISA has an annual return of 22.4% and my SIPP has 10.9%.  Both comfortably above inflation.

I have pointed out several times that it's not a simple binary choice of crypto or savings accounts, but it keeps being raised as though it is somehow the only alternative to penury.

Is this a brag?

S&P500 2021: 28.8%
NASDAQ 2021: 23.2%

Congratulations you lost out to the market.

Hell, even the FTSE did 12.4% last year and that's been dead for two decades. 

There is some good discussion on allocation in the preceding posts but I think one of the things that is becoming really apparent in traditional finance is that a 0% allocation to crypto is unarguable at this point. You can debate whether the correct allocation should be 0.5%, 1%, 5% or 95%, but probabilistic thinking is necessary.

Aegis said:

Basically I won't invest in anything that doesn't generate a cash flow somehow, which means I won't hold commodities of any sort, including crypto-assets.

Plenty of crypto protocols generating hundreds of millions of $'s in revenue by providing services, often with far lower P/E ratios than traditional companies (because nobody knows about them). Avoiding the space because it doesn't generate cash flow is incorrect analysis.

Shocking_Blue said:

Dear all,

Docusign, Coinbase, CME, Hut8, Canaan, Nvidia, Greensky, FutureFintech. Also looking at Hood.

This would be a dabble (no more than 2% of portfolio in total), but I think it makes sense and is worth the relatively small risk.

Any ideas about possible ETFs, or the above, appreciated, but will post as a new thread if this is off current topic.

Thanks.

Whats your thesis and reason for not holding BTC but holding all of the above? 

I think there are two plus points; (1) That these can be included in many tax efficient wrappers and (2) Some of these will trade like leveraged BTC and move up or down by more than BTC would.

(1) doesn't really interest me due to personal circumstances, but (2) needs a bit of research. For example, if you find a miner that isn't selling their BTC and has several thousand on the balance sheet then if BTC appreciates then obviously you have both a company that is mining an appreciating asset plus an appreciating treasury and that will do very well. You'll have to look in to hash rates and how much each miner currently holds and compare that to their current valuation to assess those factors though.

Don't think Nvidia as a crypto play is worthwhile... The GFX cards won;t be required when ETH gets its stuff together and removes PoW. I think ETH is really the only valid application of GFX cards for crypto mining, but I don't know too much there.

Even though Coinbase would trade as a play ont he whole space and probably correlated to overall market cap and volumes, I think it has some pretty big risks. DEX's are getting better everyday and will continue to take market share. I think Coinbase will end up begging regulators to protect their pie, which might actually succeed but who knows.

silvercue

darren232002 said:

silvercue said:

I avoid everything on ERC20 due to the insane fees.  I will be jumping on board Sundaeswap when it goes Live (soon) on Cardano network..

The opportunities for passive income from Crypto are incredible right now.   The problem is in the UK they have decided to tax stake rewards, yield profits and other "earn" profits as Income and not Capital Gains.  Frustrating.  

Yeah, I was reading the IRS documents about this a couple of days ago - thing is though I just have no idea how they are even going to attempt to enforce this kind of stuff. 

IRS suggests that you are liable for tax on the asset when it comes under your control (which is ambiguous to start with) but for an auto compounding pool are they suggesting that you calculate the price every few seconds that you are credited with a fraction of a token? Seems really bizarre and basically impossible to do.

Not to mention that I've been airdropped a bunch of tokens that have some value (according to an exchange) but that I can't actually sell because they are scam tokens and will clean your wallet out as soon as you authorise them. So are we saying that we could airdrop everyone 1BN 'HMRC' tokens, buy one token for say $1 on an exchange giving those tokens airdropped a theoretical value and now everyone is liable for taxes on $1BN? Makes no sense. They really are so far behind, but likewise I'm not liable for UK tax thank god.

Would also echo the aversion to ADA as I've said previously.

I am OK with paying CGT on Crypto profits.  I am very frustrated at the idea I have to pay income tax on passive income from Crypto, because, despite what side of the Crypto fence you are on, they are risky assets.  So for me to be paying 40% tax on stake and other rewards when the asset value itself could be dropping - meaning I could be paying tax on an overall position of loss, just seems completely wrong to me (forget offsetting for now).

I agree that enforcing this will be very difficult.  For some passive income, let me use my ADA staking rewards as an example (your view on ADA noted and ignored, no offence ) , they will be 100% relying on trust.  As these rewards are completely invisible to HMRC and they have no way of ever seeing them.  I see them directly in my Wallet, but I don't believe HMRC can ever see them and they certainly can't link them to me.   I am not suggesting people don't declare their taxes here, I am just pointing out the difficulties with this approach.

As a different example, if I look at the EARN facility on Crypto.com - they offer 12% on stablecoins.  That is paid in more stablecoin.   I believe that is only taxable as income when I trade it for Cash (though I need to check that).  Now I have been informed through a thread I made on the crytpo.com reddit on taxes that:

 "when you make a sale on the app and it goes into your fiat wallet, the fiat wallet is operated by a real FCA approved bank in the UK called BCB payments limited. This bank is named under your name and will be linked with your personal information i.e national insurance number. This identifies you and if enough money passes through the Fiat wallet i.e bank account then HMRC can send you letters asking you to 1) Declare where the money came from and 2) pay tax on earnings".

This was an unofficial user reply, but seems plausible.  However, all anyone has to do is not sell the stablecoin on the app, move (for free) to the exchange, trade for another crypto and move to a wallet.    That way there is no real audit trail for income tax.

I would love to see simpler taxes, but I guess that is less likley than us all agreeing on the benefits (or not) of Crypto

User232002

Scottex99 said:

Oops I accidentally traded one of those scam airdrops and lost access to all those coins in my wallet. That definitely isn't me moving them to those new wallets and I definitely don't control them, that must be the scammer.

But yes I'm not paying tax on those coins anymore as they are now lost!

I dont actually have any answers to potential tax issues but save to say HMRC will be at least 5 years behind the curve on just simple spot holdings along nevermind any DeFI shenanigans

Haha. Yeah, I think this is why the IRS are going down the route of individuals being liable for tax when they take control of the asset, because it prevents people claiming they were stolen and thus paying no tax. "The tax was due when the assets popped in to your wallet, not when they were stolen, so whilst we are sorry you got scammed you still owe us this tax amount please." Not like this solution is without its own problems though.

You are correct on the 5 years though and I think some level of tolerance will need to be given by HMRC to users. Probably reasonable to expect this and assume you'll be OK if you make a good faith attempt to pay your taxes here. 

silvercue said:

I agree that enforcing this will be very difficult.  For some passive income, let me use my ADA staking rewards as an example (your view on ADA noted and ignored, no offence ) , they will be 100% relying on trust.  As these rewards are completely invisible to HMRC and they have no way of ever seeing them.  I see them directly in my Wallet, but I don't believe HMRC can ever see them and they certainly can't link them to me.   I am not suggesting people don't declare their taxes here, I am just pointing out the difficulties with this approach.

As a different example, if I look at the EARN facility on Crypto.com - they offer 12% on stablecoins.  That is paid in more stablecoin.   I believe that is only taxable as income when I trade it for Cash (though I need to check that).  Now I have been informed through a thread I made on the crytpo.com reddit on taxes that:

 "when you make a sale on the app and it goes into your fiat wallet, the fiat wallet is operated by a real FCA approved bank in the UK called BCB payments limited. This bank is named under your name and will be linked with your personal information i.e national insurance number. This identifies you and if enough money passes through the Fiat wallet i.e bank account then HMRC can send you letters asking you to 1) Declare where the money came from and 2) pay tax on earnings".

This was an unofficial user reply, but seems plausible.  However, all anyone has to do is not sell the stablecoin on the app, move (for free) to the exchange, trade for another crypto and move to a wallet.    That way there is no real audit trail for income tax.

I would love to see simpler taxes, but I guess that is less likley than us all agreeing on the benefits (or not) of Crypto

I don't think its correct to say the rewards are invisible. I assume Cardano is just like ETH where you can explore the Blockchain and see what wallets are doing. A year ago a pretty good trading strategy was to identify the wallets of funds like 3AC or A16Z etc and track their activity on chain and just copy trade them - its the price you pay for having an open and transparent Blockchain. If your wallet funds went from, say, a Coinbase account in your name to an ADA wallet and then some of these funds come back to your CB account and are cashed out, its somewhat reasonable to assume this wallet belongs to you and all transactions made by that wallet are viewable by anyone. Of course, (1) this only becomes a thing when you want to cash out back to fiat, which may or may not be an issue and (2) its going to get a lot harder to track when you route funds from that wallet to another wallet or use some of the privacy protocols to obfuscate some of this activity (if these exist on ADA, which I am unsure of). Some governments and institutions have made mentions of KYC'd on-chain wallets removing anonymity completely - China's CBDC is basically going to be one of these.

I think generally what will happen in the future is that on/off ramps (Coinbase etc) and centralised services (BlockFi / Celsius etc) will become more and more regulated and be forced to share information with HMRC and other tax authorities as the weakest point in the chain. So your onchain activity will be largely free of government interference or oversight, but cashing in or out become the choke points. How the community reacts to that will be interesting. I imagine there will be a huge privacy and decentralisation pushback from developers but its an open question as to whether that's a good thing.

silvercue

@darren232002   What I am suggesting is that when the coins are in a wallet when you sell them for Fiat you can pay CGT on them.  There is no way that HMRC can track the reward element of that crypto.    There are also exchanges with no KYC

Cus

Can you have certain bitcoins ( and fractions thereof) that can be traced permanently? I wonder if one day you will be able to buy British legal tender bitcoins that are CGT free?

Aegis

Is this a brag?

S&P500 2021: 28.8%
NASDAQ 2021: 23.2%

Congratulations you lost out to the market.

Hell, even the FTSE did 12.4% last year and that's been dead for two decades. 

There is some good discussion on allocation in the preceding posts but I think one of the things that is becoming really apparent in traditional finance is that a 0% allocation to crypto is unarguable at this point. You can debate whether the correct allocation should be 0.5%, 1%, 5% or 95%, but probabilistic thinking is necessary.

Yes, because annualised return means "look at the last 12 months" only.  Come off it, no, that's not in fact the case.  The ISA has been going since 2017, the SIPP since 2012.  Total simple return over that time has been 108% for the ISA and 73% for the SIPP, with significant inflows to both over the years as I made further contributions with saving.  I'm comfortably ahead of equity markets, largely through taking significant risk with my investment decisions. Like I said, some of the IPOs I have participated in have done well, others have failed miserably, but I track the net performance of the pension and ISA and am very happy with both.  The pension has performed slightly better than the S&P, the ISA much better.

And yes, I will continue to argue that the correct allocation to crypto is 0%.  It's a purely speculative asset driven solely by the current mania, with no reason to expect the very longest-term value of each token from being anything other than zero.  It is very fair to say that calling my position "unarguable" is just plain wrong because I will continue to argue it from a "traditional finance" perspective, whatever that is.

User232002

silvercue said:

@darren232002   What I am suggesting is that when the coins are in a wallet when you sell them for Fiat you can pay CGT on them.  There is no way that HMRC can track the reward element of that crypto.    There are also exchanges with no KYC

I'm not sure you understand. They can indeed track the reward element as its on a public Blockchain. They can see money went from CB (or wherever) to a wallet address and then they can see that wallet interacting with whichever smart contract its interacting with (which staking would be). 

For example, Eminem recently bought BAYC 9055. Here is the wallet that holds that token: https://etherscan.io/address/0x5d752c35789bdfd1287971972091ba47afd3ac93 You can see that he also owns two ENS domains; rapmusic.eth and virtualweed.eth Funds to buy it came from giorgio.eth and you can follow the link to that address and see what that wallet owns as well.

Cardano explorer here: https://explorer.cardano.org/en Put your wallet address in and play around

Do they know this? & Will they track it? Probably not because, as we've established, they are miles behind. But I think its important to acknowledge that they can see on-chain activity if they particularly wanted to. I think no-KYC exchanges will be strangled by regulation over the next 3-5 years and its pretty hard to argue in their favour as much as I might like to. 

Cus said:

Can you have certain bitcoins ( and fractions thereof) that can be traced permanently? I wonder if one day you will be able to buy British legal tender bitcoins that are CGT free?

Yes it is (kinda) possible. Over the last few years there have been movements to have any Bitcoins that were used on silk road 'banned,' have only Bitcoins mined from renewable sources or in the US be allowed on exchanges. Both failed miserably.

Aegis said:

Yes, because annualised return means "look at the last 12 months" only.  Come off it, no, that's not in fact the case.  The ISA has been going since 2017, the SIPP since 2012.  Total simple return over that time has been 108% for the ISA and 73% for the SIPP, with significant inflows to both over the years as I made further contributions with saving.  I'm comfortably ahead of equity markets, largely through taking significant risk with my investment decisions. Like I said, some of the IPOs I have participated in have done well, others have failed miserably, but I track the net performance of the pension and ISA and am very happy with both.  The pension has performed slightly better than the S&P, the ISA much better.

S&P500 returns since start of 2017 are 110% yet your returns are 108% and 73%. 'Comfortably ahead' - I'll let others judge that.

Don't really want to get in to a measuring contest, but I've 4x'd my entire portfolio since the start of 2021 and that includes BTC/ETH and almost everything I own being 30%+ off ATHs.

Aegis

Aegis said:

Yes, because annualised return means "look at the last 12 months" only.  Come off it, no, that's not in fact the case.  The ISA has been going since 2017, the SIPP since 2012.  Total simple return over that time has been 108% for the ISA and 73% for the SIPP, with significant inflows to both over the years as I made further contributions with saving.  I'm comfortably ahead of equity markets, largely through taking significant risk with my investment decisions. Like I said, some of the IPOs I have participated in have done well, others have failed miserably, but I track the net performance of the pension and ISA and am very happy with both.  The pension has performed slightly better than the S&P, the ISA much better.

S&P500 returns since start of 2017 are 110% yet your returns are 108% and 73%. 'Comfortably ahead' - I'll let others judge that.

Don't really want to get in to a measuring contest, but I've 4x'd my entire portfolio since the start of 2021 and that includes BTC/ETH and almost everything I own being 30%+ off ATHs.

Again, you are conflating the time weighted return with the money weighted return, assuming that I must have invested in full at the start of the investment period.  As I already mentioned, there were significant cash inflows over both holding periods, hence the annualised and simple  returns are only worth calculating against a benchmark if you also account for the same cash movements, which I guarantee you can't do with my portfolio because I haven't shared enough data with you.  So yes, judge away, but be sure that you actually know what you're talking about, which you clearly didn't with the above comments.

As for 4xing your portfolio, well done.  I'd be equally impressed with the investment ability of someone who won the lottery - the results are clearly good, but calling that an investment strategy just wouldn't be accurate.  Perhaps with crypto it's better to compare to a Martingale strategy for betting, in that it can certainly look good right up until the point where it fails, at which point the interim value becomes utterly meaningless.

User232002

I just don't care enough to run precise numbers when approximations will do. Annualised returns for the last 5 years of the S&P500 are like 16 or 17%; so no I wouldn't be bragging about 22% in the midst of one of the biggest bull markets in history.

Thank you for your heartfelt congratulations on my portfolio performance. Unfortunately, I am not as pleased - mainly because I spend too much time replying to posts on here than conducting further research in the space. Something I'm looking to correct for 2022.

Aegis

darren232002 said:

I just don't care enough to run precise numbers when approximations will do. Annualised returns for the last 5 years of the S&P500 are like 16 or 17%; so no I wouldn't be bragging about 22% in the midst of one of the biggest bull markets in history.

Thank you for your heartfelt congratulations on my portfolio performance. Unfortunately, I am not as pleased - mainly because I spend too much time replying to posts on here than conducting further research in the space. Something I'm looking to correct for 2022.

You can't run the numbers because you have no idea of timings at all.  This can be illustrated by taking an asset which doubles in value in a year, and looking at the different returns you would see if you invested on day 1 (100%) or day 365 (0%).  This then has a huge effect on the calculated annualised return for the portfolio.  This is why comparisons to benchmarks have to be time-weighted to make any sense at all.  I'm genuinely surprised that you are having trouble grasping this - it's something every investor should know so they can check how they are doing compared to chosen indices.  Indeed, it's even stated for regular savings accounts, where people are always cautioned that they will not earn the full headline rate (e.g. 5%) on the full balance because they will be adding funds monthly

For the record, the comparison figure for the S&P500 over the same timespan as the ISA is 16.3%, taking into account flows of cash into the portfolio and assuming instant purchase of the index with no fees.  I'm quite happy to have outperformed this index by 6% a year annualised net of all fees, as I'm sure anyone would.

In any case, this wasn't intended to be a brag, merely an attempt to point out that no, I am not settling for a 0.25% annual return.  Instead I am growing my capital at a rate considerably over inflation while focusing on investments where I can fully understand where the value comes from.

Frankly I am fed up of the idea that anyone not investing in crypto is ignorant of investment principles.  I firmly believe that I can show myself to be a savvy investor, and I have chosen to avoid crypto assets because I can't get good answers to simple questions on how to work out fair value.  Without that, it doesn't matter how much it goes up by, I'm not buying if the only way to make money is for someone else to buy into the asset at a greater price.  This is Greater Fool Theory, and I made a decision a long time ago not to invest in anything where this was the only way to make money.