Majority of bitcoin trading is a hoax, new study finds

jim bell jdb10987 at
Sun Mar 24 12:23:08 PDT 2019

 On Friday, March 22, 2019, 10:14:06 PM PDT, Razer <g2s at> wrote:
 ""The analysis showed that "substantially all of the volume" reported on 71 out of the 81 exchanges was wash trading, a term that describes a person simultaneously selling and buying the same stock, or bitcoin in this case, to create the appearance of activity in the market. In other words, it's not real. 

"Those exchanges report an aggregated $6 billion in average daily bitcoin volume. The study finds that only $273 million of that is legitimate."


I'd like to present a possible, partial explanation for this, one that makes fundamental economic sense.
A few years ago, the IRS declared its position that selling or transferring bitcoin (and other electronic currencies) was taxable.   Myself, I think that is foolish, because buying and selling foreign currency isn't taxable.  (more on this if you are interested).   
So if you are an American, and you sell a bitcoin whose value has appreciated, you are supposed to pay tax on that increase.  However, if you sell a bitcoin that has decreased in value, you can offset other income based on this loss.  Don't let the length of time you own that bitcoin exceed one year, if you intend to take a loss on it.  (otherwise, it becomes a long-term capital loss.)
But there may be implications here.  Suppose there is a foreign athlete or actor, or other highly-paid individual who enters America occasionally and earns money.  Ordinarily, you'd expect he has to pay American tax on this money, at least the money he has earned in America.  And he could do so.   But suppose he sold, in America, an electronic currency that went down from when he sold it.  When he files his US tax return, he would offset, possibly completely, his ordinary earnings from the sale of that electronic currency.  So, possibly he would pay no America taxes at all.  Presumably, this could be done entirely legally.Then, suppose he leaves America, and sells another electronic currency that has appreciated in value, he could make up all this money, overseas, with no taxes at all to pay.   That's because most nations probably don't tax electronic currency increases.
Yes, this sounds complicated, but it might work.  It takes advantage of the high volatility of bitcoin and other electronic currencies.  Is this going on now?  If it's legal, it just about has to be going on.  Obviously, the individual himself would probably not be coordinating these purchases and sales.  Some specialized tax attorney would handle the details.  
          Jim Bell

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