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The Wolf Den #589 - Legally Avoid Paying Taxes

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September 28 · Issue #589 · View online
The Wolf Den Crypto Newsletter
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In This Issue:
  1. Legally Avoid Paying Taxes
  2. Legacy Markets
  3. Alex Mashinky Resigns
  4. Bear Markets Are For Building
  5. OG Cypherpunk Explains Why He Is Building Platform For Smart Contracts | Dean Tribble, Agoric
  6. My Recommended Platforms And Tools
Legally Avoid Paying Taxes
The buying and selling of cryptocurrencies in the United States does not trigger a wash sale.
From Investopedia:
“The wash-sale rule is an Internal Revenue Service (IRS) regulation that prevents a taxpayer from taking a tax deduction for a loss on a security sold in a wash sale.
The rule defines a wash sale as one that occurs when an individual sells or trades a security at a loss and, within 30 days before or after this sale, buys the same or a substantially identical stock or security, or acquires a contract or option to do so.
A wash sale also results if an individual sells a security, and the individual’s spouse or a company controlled by the individual buys a substantially equivalent security during the 61-day wait period.
The point of the rule is to prevent investors from creating an investment loss for the benefit of a tax deduction while essentially maintaining their position in the security.”
Using this method resets the clock for long-term capital gains. This makes it a poor strategy for short-term traders looking to (legally) avoid taxes, but a viable one for longer term holders looking for relief.
Tax strategy is an important consideration, even when coins are down. This could be a smart time to lock in losses or start planning to restructure your portfolio. Remember, you can sell, lock in the write off, and buy right back in.
That’s one strategy.
What I want to talk about today is another strategy to legally avoid taxes, but it does not involve selling. It was wildly popular until recent events, and is one that has become taboo to discuss.
I dare breach the subject, with the disclaimer that it is risky and not for everyone, and something to likely consider further down the road when the space matures.
Crypto loans, if done right (key phrase), can still be a viable option to avoid taxes.
Taking a crypto loan does not require a phone call, bank visit, financial statement, credit check, or appointment. A bank can reject your loan for a myriad of reasons.
Crypto lenders don’t care what you plan to do with the money or your past history. All they need is your collateral to make the loan happen. They have the coins, you get the loan.
The most important consideration when shopping for a loan is the LTV ratio. The loan-to-value ratio represents the relationship between deposited collateral and the loan amount. It is a technical term across all lending markets. In our case, it refers to the ratio of crypto you put up for collateral vs. the value you receive back. 
Since loans are no longer at peak popularity, the LTV terms could be more favorable to draw in business. As a standard in the crypto industry, you expect platforms to offer roughly a 50% LTV ratio.
Taking a loan comes with major risk. If you fail to pay back the loan in full or make all interest payments, you will have overpaid dramatically for the loan. Further, if the price of your collateral drops significantly, you will be at risk of a margin call and liquidation of assets. Remember, the game is designed for the house to always make a profit. They will not reach out to you and offer your money back. They will expect interest payments to be made.
That said, if the price moves in your favor, you are in good shape. It’s a delicate balancing act to attempt for those who want to avoid paying taxes.
The other obvious risk is the counter party - we have seen platforms explode, alongside the user assets being held there.
This is not something I am doing personally, or even considering. But it fits into the parameters of some people’s risk.
This process is still in its infancy and will likely be consumed by legacy banks in the future. In the next bull market, loans will likely look different but will still be a very popular crypto use case.
NOTE: I AM TRAVELING AND NOT TRACKING THE CHARTS, AS NOTHING HAS DRAMATICALLY CHANGED.
Legacy Markets
Bloomberg Markets - Bloomberg
“The dollar soared to another record after the White House talked down the prospect of weakening the currency. The continuing global bond rout pushed 10-year Treasury yields to the highest since 2008 and UK 30-year yields to the the highest since 1998.
Major equity levels crumbled after a slew of hawkish Federal Reserve speakers stoked fears about rising interest rates and the economic outlook. European stocks dropped for a fifth day as investors abandon the region at levels last seen during the euro zone debt crisis, according to Citigroup Inc. strategists. US futures and Asian shares also fell.”
Key events this week:
  • Fed’s Mary Daly, Raphael Bostic, Charles Evans and ECB President Christine Lagarde speak at events, Wednesday
  • Euro zone economic confidence, consumer confidence, Germany CPI, Thursday
  • US initial jobless claims, GDP, Thursday
  • Fed’s Loretta Mester, Mary Daly speak at events, Thursday
  • China PMI, Friday
  • Euro zone CPI, unemployment, Friday
  • US consumer income , University of Michigan consumer sentiment, Friday
  • Fed’s Lael Brainard and John Williams speak, Friday
Some of the main moves in markets:
Stocks
  • The Stoxx Europe 600 fell 1.6% as of 10:10 a.m. London time
  • Futures on the S&P 500 fell 1%
  • Futures on the Nasdaq 100 fell 1.3%
  • Futures on the Dow Jones Industrial Average fell 0.8%
  • The MSCI Asia Pacific Index rose 0.2%
  • The MSCI Emerging Markets Index rose 0.4%
Currencies
  • The Bloomberg Dollar Spot Index rose 0.5%
  • The euro fell 0.4% to $0.9557
  • The Japanese yen was little changed at 144.76 per dollar
  • The offshore yuan fell 1.1% to 7.2616 per dollar
  • The British pound fell 0.4% to $1.0685
Cryptocurrencies
  • Bitcoin fell 2.1% to $18,675.08
  • Ether fell 3.6% to $1,276.72
Bonds
  • The yield on 10-year Treasuries advanced six basis points to 4.00%
  • Germany’s 10-year yield advanced 10 basis points to 2.33%
  • Britain’s 10-year yield advanced one basis point to 4.52%
Commodities
  • Brent crude fell 0.2% to $86.06 a barrel
  • Spot gold fell 0.6% to $1,618.48 an ounce
Alex Mashinky Resigns
Bankrupt Crypto Lender Celsius Network's CEO, Alex Mashinsky, Resigns
Alex Mashinsky has officially resigned. Chris Ferraro, Celsius CFO, will act as the company’s interim leader and chief restructuring officer.
“"I elected to resign my post as CEO of Celsius Network today,” said Mashinsky. “Nevertheless, I will continue to maintain my focus on working to help the community unite behind a plan that will provide the best outcome for all creditors – which is what I have been doing since the company filed for bankruptcy,” he added.“
Bear Markets Are For Building
Bitcoin Payment Provider Strike Raises $80 Million - Bitcoin Magazine - Bitcoin News, Articles and Expert Insights
“Bear markets are for building.” We have seen a slew of companies raising money and VCs announcing massive funds. Every company head I speak with makes the point that it’s easier to build in the bear market with less noise.
Jack Mallers’s Strike quietly raised $80 million in a series B funding round led by Ten31. The focus is to “revolutionize payments for the largest merchants, marketplaces, and financial institutions in the payments industry.” The funds are going to enable new products focused on institutions and their payment needs.
We can expect to see crypto accepted around the world as it becomes a legitimate means of payment… after the bear market.
OG Cypherpunk Explains Why He Is Building Platform For Smart Contracts | Dean Tribble, Agoric
Podcast - The Wolf of All Streets
OG Cypherpunk Explains Why He Is Building Platform For Smart Contracts | Dean Tribble, Agoric
Dean Tribble is an OG cypherpunk and former Principal Architect at Microsoft. A 34-year industry veteran, he co-designed the first smart contract system, AMiX, architected the brokerage information system for Charles Schwab, and built a start-up that was later acquired by Microsoft.
We talked about smart contracts, original cypherpunk ideas, and Agoric, the platform for smart contract developers that Dean is working on right now.
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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to “Buy,” “Sell,” or “Hold” an investment.
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