Bitcoin, Altcoin and Cryptocurrency Thread
- Thread starter PocketZeven
- 405 comments
- 39,992 views
- 16,433
- United Kingdom
VolkswagenX
(Banned)
- 1,532
- Netherlands
- 28,418
- Glasgow
- GTP_Mars
Serious question, but how should you handle tax on any crypto profits you might make?
How does the government know how much you have made and where the money is?
I am unlikely to ever make enough profits from crypto for it to make any difference, but it would be interesting to know what people who have made some money have done when it comes to handling tax. I guess it depends on where you are, but in the UK, I reckon it would be covered by Capital Gains Tax, but I don't know much about the entire subject.
In the UK, we are allowed to make up to around £10k without incurring income tax, and then start to get taxed on any income above that, so I would assume that someone who is earning a salary is liable for tax on any crypto or investment profits.
How does the government know how much you have made and where the money is?
I am unlikely to ever make enough profits from crypto for it to make any difference, but it would be interesting to know what people who have made some money have done when it comes to handling tax. I guess it depends on where you are, but in the UK, I reckon it would be covered by Capital Gains Tax, but I don't know much about the entire subject.
In the UK, we are allowed to make up to around £10k without incurring income tax, and then start to get taxed on any income above that, so I would assume that someone who is earning a salary is liable for tax on any crypto or investment profits.
- 16,433
- United Kingdom
Taxable as capital gains I believe. As with income tax, there's a tax free allowance of about £12,000 , then you pay either 10% or 20% (I think) on earnings above that, depending on which income tax bracket you're in. I suppose in simple terms, if you're making less than £12,000 a year from Crypto, don't mention it, if your making more, get on self assessment and declare it. Realistically you might have to pay about £800 if you made £20,000 (assuming your standard income is sub-50k... as an example)... but you'll get fined about £1000 (in my personal experience), if they find out that you've not declared it, so it might be a faff, but probably worth it.
Bare in mind I'm not expert in this though!
- 28,418
- Glasgow
- GTP_Mars
I guess technically I should declare any profit since I already have a salary which puts me well over the tax-free threshold, but at the moment I don't have any 'profit' since I only hold cryptos and haven't sold any yet.
I wonder how this might apply to GBP held in a crypto exchange account though, and not one's bank account? Like, if I sold my crypto today/traded it for GBP, I'd have a profit - but how does anyone know it's profit, since it depends on how much I paid for it?
If I had sold the same crypto this time last year, I would have lost money overall... but since the value has sky-rocketed in the last few months, that loss is now inverted, but I still haven't made any profit because I haven't sold it yet.
Boy, imagine being a crypto tax inspector
- 16,433
- United Kingdom
My understanding is that there's a separate threshold for capital gains, irrespective of your income tax threshold. If you're in the basic rate bracket for income tax, you still get to earn £12,300 capital gains, before you have to start paying the 10% on the gains above that threshold. If you're a high rate tax payer, it would be 20%.
I looked into this when my sister sold a property she'd not been living in, as she was likely to be liable for 28% tax on the sale value (capital gains taxes on property are higher)... so I don't really understand how the portfolio value is accounted for when it comes to investments. If you're making that kind of wedge from it, best to run it by a tax accountant - like I say, I got bit once before - paid the fine and got my tax code wrecked for about 5 years while being made to go self-assessment.
- 28,418
- Glasgow
- GTP_Mars
Well in that case I'm in the clear
I did read that HMRC have to be notified by crypto exchanges if a UK resident has more than £5K in transfers in any tax year, but that probably means they are not bothered by small fry like me.
That said, I have two empty bank accounts doing nothing, so I will use one to transfer any cash from crypto into so I can keep track of it easily. It will be a long time before I get anywhere the tax threshold though, so I reckon it is probably safe to proceed for now!
I wonder how it actually works.
If I should buy a few Bitcoins how do I have to do that? Do I need a "mining computer" and watch/work with Bitcoin every day? Or is it like a classic investment (buy bonds and do nothing)? What if I make a huge profit, how do I convert Bitcoins back to Euros?
Is there a good platform where I can learn everything I need to know about Bitcoin?
If I should buy a few Bitcoins how do I have to do that? Do I need a "mining computer" and watch/work with Bitcoin every day? Or is it like a classic investment (buy bonds and do nothing)? What if I make a huge profit, how do I convert Bitcoins back to Euros?
Is there a good platform where I can learn everything I need to know about Bitcoin?
- 28,418
- Glasgow
- GTP_Mars
"Mining" Bitcoin is possible, but I think it is long past the point where it is financially viable - you need considerable processing power and you would probably spend as much on electricity as you would earn in BTC... a friend built a rig specifically for BTC mining a few years back and he never made anything out of it.
Nowadays, you can buy/trade cryptocurrencies online using exchanges such as eToro and Coinbase. I use the latter, which only allows you to buy and sell the biggest cryptos. They charge commission unless you are a premium user, hence even buying some crypto will cost you money that you will never see again, albeit only maybe around 0.5% of your order price. (They also charge commission on trades and sales...)
Just like shares, you can buy as much (in terms of your own currency) as you want, but the value will fluctuate madly, and is pretty much not connected to anything other than how much other people are buying or selling. As such, it is extremely risky and I consider it nothing more than a gamble. That said, like investments, you can always just hold on to it until it is worth more before selling, but being so unpredictable, there's no guarantee that it will regain the price you paid for it.
Knowing when to sell is a bit tricky too. It is tempting to think that you could double your money, or get 10 times your investment - indeed, my crypto portfolio has increased by a factor of 18 in less than a year (pity I didn't have more invested!
)... but that only happened after it had lost 90% of its value. So, I'm currently in profit, but it can lose its value very, very quickly, and it has done before. Indeed, cryptos can lose 10-20% almost instantly, so I won't ever be investing any money that I can't afford to lose.Also, selling is not instant... on some exchanges, it can take several hours between clicking 'sell' or 'trade' and for the transaction to occur, so if the price plummets in that period, you're screwed.
Also also, some cryptos can effectively be wiped out, so there's that too. Coinbase has ceased trading in Ripple, for example, and hence it may be only a matter of time until it has no value at all.
Last edited:
- 11,325
- Marin County
"Mining" Bitcoin is possible, but I think it is long past the point where it is financially viable - you need considerable processing power and you would probably spend as much on electricity as you would earn in BTC... a friend built a rig specifically for BTC mining a few years back and he never made anything out of it.
Nowadays, you can buy/trade cryptocurrencies online using exchanges such as eToro and Coinbase. I use the latter, which only allows you to buy and sell the biggest cryptos. They charge commission unless you are a premium user, hence even buying some crypto will cost you money that you will never see again, albeit only maybe around 0.5% of your order price. (They also charge commission on trades and sales...)
Just like shares, you can buy as much (in terms of your own currency) as you want, but the value will fluctuate madly, and is pretty much not connected to anything other than how much other people are buying or selling. As such, it is extremely risky and I consider it nothing more than a gamble. That said, like investments, you can always just hold on to it until it is worth more before selling, but being so unpredictable, there's no guarantee that it will regain the price you paid for it.
Knowing when to sell is a bit tricky too. It is tempting to think that you could double your money, or get 10 times your investment - indeed, my crypto portfolio has increased by a factor of 18 in less than a year (pity I didn't have more invested!
Also, selling is not instant... on some exchanges, it can take several hours between clicking 'sell' or 'trade' and for the transaction to occur, so if the price plummets in that period, you're screwed.
Also also, some cryptos can effectively be wiped out, so there's that too. Coinbase has ceased trading in Ripple, for example, and hence it may be only a matter of time until it has no value at all.
Does anyone actually use bitcoin as money? I'm just curious. It seems incredibly foolish to spend it on anything if tomorrow it has 5% (or more!) more purchasing power. Doesn't it?
FPV MIC
Premium
- 4,191
- Australia
- GT-MIC
I'm curious about this as well. Couldn't it just as easily be worth nothing at all? I mean if someone decided that some imaginary unit was all of a sudden worth something, couldn't someone else decide it's worth nothing. It doesn't even really exist at all does it, except to those people that own this imaginary currency?
- 28,418
- Glasgow
- GTP_Mars
It's worth whatever someone else is willing to trade for it at the time...
FPV MIC
Premium
- 4,191
- Australia
- GT-MIC
And this is what I don't really understand, why would I give someone something for something that doesn't really exist? If people all of a sudden stop buying into it it's worth nothing at all.
- 11,325
- Marin County
I think it's particularly mysterious if nobody is actually using it for it's only purpose.
- 28,418
- Glasgow
- GTP_Mars
You could ask the same question about Fiat currency... paper notes are not actually worth anything either, it's all about relative value.
That said, I'd be a bit miffed if I'd paid 1 ETH last year for a £100 concert ticket, only to then know that I could have traded 1 ETH today for £1500... buyer beware!
Last edited:
FPV MIC
Premium
- 4,191
- Australia
- GT-MIC
Buyer beware for sure! I get that paper money is relative too, but I can actually walk into a shop and purchase something with that. The way the price is going for Bitcoin no one will be able to afford it so it's going to crash, and hard isn't it? Who would buy in now at over 50k US a unit, other than Elon Musk of course.
- 28,418
- Glasgow
- GTP_Mars
Because you don't need to buy any specific quantity of BTC, you just buy whatever share you want.
I traded £100 worth of LTC for BTC (hey, look, it looks like I know what I'm talking about
) and then BTC tripled in value, so I sold it and walked away with £300. (That was something like 0.01 BTC when I bought it.) So, you don't need to buy 'a bitcoin'... that said, if you invest when the value of BTC is very high and then it crashed, you may never get your investment back. And the trouble is, nobody knows when it has peaked or when it might drop or even get wiped out, so I personally won't play with cash I can't afford to lose. I view crypto as a bit of fun and a gamble... ETH (Ethereum) has increased in value by 18 times this year alone, so I'm quite happy now, but there's nothing to say it will not become worthless tomorrow either.
Last edited:
FPV MIC
Premium
- 4,191
- Australia
- GT-MIC
Thanks for explaining it to me, I now have a bit better understanding. I didn't even know you could buy part shares in a coin (hey, look, you can really tell how little I know about this nowBecause you don't need to buy any specific quantity of BTC, you just buy whatever share you want.
I traded £100 worth of LTC for BTC (hey, look, it looks like I know what I'm talking about
I view crypto as a bit of fun and a gamble... ETH (Ethereum) has increased in value by 18 times this year alone, so I'm quite happy now, but there's nothing to say it will not become worthless tomorrow either.
, but you don't learn unless you ask). When I look at this chart though it seems very much in the danger territory to me and the part of your quote I highlighted is exactly what I was concerned about, especially the wiped out part. It looks to me as if it would only take some of the main early buyers to start cashing out and the whole thing would come crumbling down.... and then it starts to look more and more Ponzi like.
- 28,418
- Glasgow
- GTP_Mars
Well, yeh... ironically, buying BTC right now is indeed perhaps a luxury only people who can afford to lose cash can afford... and if it then makes them a fortune, they will boast about how clever they were to 'invest', when infact it was nothing more than a blind bet.Thanks for explaining it to me, I now have a bit better understanding. I didn't even know you could buy part shares in a coin (hey, look, you can really tell how little I know about this now
When I look at this chart though it seems very much in the danger territory to me and the part of your quote I highlighted is exactly what I was concerned about, especially the wiped out part. It looks to me as if it would only take some of the main early buyers to start cashing out and the whole thing would come crumbling down.... and then it starts to look more and more Ponzi like.
View attachment 992763
That said, the more legitimacy cryptos get, the more it will likely gain in value, hence why Elon Musk's investment made such an impact.
My personal opinion is that it will probably be sustainable and perhaps even grow as crypto (and BTC in particular) becomes more mainstream, so paradoxically it could be that BTC might explode in value even compared to what it is now, BUT... I ain't going to play with money I can't afford to lose, which for me is almost all of the money I have.
- 11,325
- Marin County
Sure. BUT fiat currencies are useful because of their stability/fungibility/liquidity. They are not seen as an asset. In it's current "exploding" form, Bitcoin is almost useless at being money. It's hard to justify spending 1BTC on a new BMW 5 series if that 1 BTC could buy a BMW 7 series next week. You know?
Last edited:
- 6,041
- Puget Sound
- Crash852
You're absolutely right that Bitcoin and other cryptocurrencies are only valuable because there are enough people who believe and agree it has value. But "value" of something is a social construct that people have agreed upon. Gold is similar; if everyone stops believing that its valuable tomorrow, the price will entirely collapse, and today, you can't walk into a store and just hand over a little nugget of gold to pay for your purchase either. Both have become stores of value, and as long as enough people have agreed that that's the case (and it's becoming more and more so each day), then it will always have value.
BTC is incredibly volatile right now and that makes it really tough to be used as day-to-day currency. As more people and institutions buy into it (and hold), its volatility will decrease and liquidity will follow. With increased liquidity, fungibility will follow.
Much of BTC's original promise was around an alternative, global, decentralized currency, but I would think of BTC as more than that to increasingly become a viable form of stored value. I don't think crypto will ever completely replace fiat currency, but I don't think it's going away either. It's here to stay, and someday in the future, I do see them being used analogously as cash when volatility is significantly down in the future.
FPV MIC
Premium
- 4,191
- Australia
- GT-MIC
I've never been much of a gambler so if you were to offer me an ounce of gold or half a cross stroke in a 4 I'll take the gold every time.
The gambling side of this is why I don't see anything but a crash and it's also why I don't see it becoming a mainstream investment. It doesn't seem to be about people investing wisely, it's seems more like people taking a punt on some easy money. That's something I've very rarely seen end well.
- 11,325
- Marin County
Can someone answer a technical question I have?
The blockchain problems that computers solve to mine bitcoin - does each subsequent problem get more complex and harder to solve? I feel like I remember that's how it works.
The blockchain problems that computers solve to mine bitcoin - does each subsequent problem get more complex and harder to solve? I feel like I remember that's how it works.
A crypto youtuber mentioned SwissBorg. I didn't know that you have to give all your personal information and a recent photo to be able to buy cryptos. I don't like that at all. I mean giving my personal information on the internet.
- 28,418
- Glasgow
- GTP_Mars
Yeh, you need to verify your identity as otherwise it would be used for money laundering.A crypto youtuber mentioned SwissBorg. I didn't know that you have to give all your personal information and a recent photo to be able to buy cryptos. I don't like that at all. I mean giving my personal information on the internet.
You also need to link directly to a bank account to be able to withdraw fiat currency, and some banks do not allow such links, so you may also need a new online bank account (such as Revolut) which also requires you to send copies of very important documents such as your passport.
Suffice it to say, if you have any online privacy issues at all, then crypto trading is not for you.
Last edited:
Double post but I want @Touring Mars to read this.
Do I need a SIM card or is it possible to use my smartphone with only a WiFi connection to work with the crypto app?
I'm still planning on winning multi, multi-millions of euros with Euromillions.
Do I need a SIM card or is it possible to use my smartphone with only a WiFi connection to work with the crypto app?
I'm still planning on winning multi, multi-millions of euros with Euromillions.
- 28,418
- Glasgow
- GTP_Mars
