November 7, 2021 - How The Rich Get Richer!!
It’s pretty crazy to think that in a year when countries saw their biggest falls in GDP for almost a century, the World’s billionaires got 54% richer.
Not only that, but they paid very little (if any tax) on these gains.
In fact, one of the reasons that the really rich can get richer is because they efficiently use tax codes to their advantage. A tax code that was written with only one group of people in mind - them.
This has also ignited a debate around the world about what the best way is to tax these Billionaires. Contrary to public opinion, it’s a lot harder to actually do it.
That’s why I decided to go down this rabbit hole and explore exactly how these folks are able to avoid so much taxes. I also examine some of the proposals that have been floated around capital gains and what impact these could have on the markets (including crypto).
No partisan hype here. Just a data driven analysis from an impartial Libertarian crypto guy. This is all covered in my latest video which you can watch over here.
📊 Portfolio Update 📊
For those of you who saw my video this week on Fantom, I had decided to allocate some of my portfolio to the FTM. It really is an exciting project with strong development, an ambitious roadmap and highly scalable tech.
I sold some of my PAXG and MATIC to buy this FTM. In terms of other projects that I am looking into, I am really excited about some of the projects building on the Metaverse and I will be looking into a few of these in the coming week.
As always, I will keep you guys updated in my Telegram channel
ETH 25.78% | BTC 19.74% | SOL 14.13% | DOT 12.22% | USDC 4.82% | RUNE 3.46% | HNT 3.11% | ATOM 2.96% | UST 2.72% | ADA 2.31% | PAXG 2.17% | INJ 1.77% | FTM 1.54% | AR 1.40% | LINK 1.03% | MATIC 0.84%
📈 Thoughts on Market 📈
On Wednesday, the total market cap of all cryptocurrencies combined hit a new all time high of 2.75 trillion dollars (according to CoinMarketCap, at least). That’s 200 billion more than the total market cap we saw at the last peak back in May just before the big correction, and that’s no coincidence. As I mentioned in last week’s crypto review, I think we’re on the cusp of another correction, and not just because we’ve hit another market cap milestone.
For starters, the Federal Reserve recently confirmed that they will be reducing their government bond purchases, which currently total 120 billion dollars per month. For those who don’t know, the demand for government bonds determines the baseline interest rate for saving and borrowing. Low demand = high interest rates, and high demand = low interest rates. Given that the Federal Reserve will start reducing their bond purchases by 15 billion dollars per month, interest rates could rise in response.
This is a problem for two reasons. First, increasing interest rates means that borrowing becomes more expensive. This means that not only will consumers spend less on goods but also that companies will reduce lending to fund investment. This means less consumer demand for goods and services of companies and less investments by said companies. Effectively, a drag on earnings and share prices.
Second, and more importantly, institutional investors see Bitcoin as an inflation hedge. If the FED’s tapering somehow successfully reduces inflation, this could reduce demand for Bitcoin among institutional investors.
Other factors that could crush the crypto market in the coming weeks relate to regulations. As I discussed in yesterday’s video about the FATF’s finalised crypto “recommendations”, we might be on the cusp of a global crackdown on cryptocurrency in the name of money laundering, and some counties have already begun implementing the FATF’s crypto “recommendations”.
One of the FATF’s focuses is of course stablecoins, and last Monday the “President’s Working Group on Financial Markets” issued their own finalised “recommendations” as to how stablecoins should be treated.
Oddly enough, they praised the fact that stablecoins “support faster, more efficient, and more inclusive payments options”, but stressed the importance of regulating stablecoin issuers in the same way as banks. Call me crazy, but it sounds like my conspiracy about USDC becoming the US government’s CBDC is starting to come true.
The last macro factor to consider is what is due to happen any day now - and that deserves its own section.
👨⚖️ Infrastructure Bill 👨⚖️
On Friday, the US House finally passed the infrastructure bill. This means it can finally make its way to Biden’s desk to be signed into law. For those that have been following, this is the bill that has some anti-crypto provisions. If you have not been following, there are numerous videos on the channel but I covered it briefly in my weekly news update this week.
So, what does this mean now?
Well firstly, let’s address the concerns…
The first one is on the expanded definition of a “broker” for tax reporting purposes. This won’t just be an exchange or Virtual Asset Service provider but could also be interpreted to include miners, node operators and potentially DeFi developers. The complications and the near impossibility of complying with this provision are immense.
The second provision is all of 8 words and is an amendment to section 6050I of the tax code. For those that don’t know, this section of the tax code has required businesses or individuals that receive physical cash or bank transfers over $10,000 to file a form with the IRS. This form sets out information such as name, address, and Social Security Number. Not complying with this provision is actually considered a felony!
The limited amendment has now changed the word “cash” to “any digital asset” as a definition. So, interpreted broadly, this means that anyone who receives over 10k in crypto (think buying an NFT) will have to collect this information. Yet again, another near impossibility.
So, on the face of it, these provisions don’t look good. But, as always, there is a lot more nuance to it.
Firstly and most importantly, these don’t go into effect until January of 2024. That is a long time in politics and it's especially long when you consider how volatile the US political landscape is. The Democrats are in a vulnerable position in 2022 and the president’s approval rating has taken a real beating.
If the Democrats lose the house & senate next year, then there is the chance that a Republican controlled congress could introduce legislation that could blunt these provisions. There is also the possibility that the altered definition of section 6050l may be unconstitutional - that’s at least according to Jerry Brito of the CoinCenter think tank. As an aside, Coin Center has been one of the most effective crypto lobbying forces so give Jerry a follow to keep up with developments from Capitol Hill.
Apart from the fact that these provisions only go into effect in 2024, it’s still important to stress that it's all open for interpretation by the Treasury. They have even come out and said that they won’t be including miners and developers etc. in their interpretation. I am inclined to also believe that. Not because they don’t want to grab that tax revenue but because it would be an impossibility to enforce.
This is perhaps the reason why crypto markets have had a relatively moot reaction to the passing of the bill. As I explained in my Tweet yesterday, the news appears to have been priced in. Participants are viewing this bill as glass half full and are focused on all the other really exciting developments taking place.
Of course, it’s not going to be an easy battle against the politicians, but this tweet thread by Jake Chervinsky should give you some optimism.
🔝 Top Market Tips 🔝
“Be fearful when others are greedy, and greedy when others are fearful”. This famous quote by billionaire investor Warren Buffett is more relevant than ever these days, because we’re seeing a lot of greed in the crypto market these days.
I reckon that’s pretty clear without any indicators. Shiba Inu hitting all time highs, retail investors piling into meme coins that are obviously scams, and most importantly, me making a video comparing Shiba Inu and Dogecoin.
Does this mean you should be fearful? Absolutely. The market has been insanely bullish and you might be sitting on some amazing gains right now, but the road to the moon is bumpy, not smooth. Ask yourself if you’re willing to hold the cryptos you have now through a 20, 30, maybe even 50 percent drop. If you don’t think you can, you’ve either invested too much or know deep down that you’re gambling, not investing. This is one of the many trading mistakes you can make, and it’s one that’s easy to make with how bullish the crypto market is.
You guys know that I am a fan of the saying “when in doubt, zoom out”. This is usually applied to long timeframe price charts that allow you to get a better idea of how far the market has come. However, it can also be applied to those cryptocurrencies that have spiked up to irrational hype driven levels. For example, here is the long term price action of MANA.
As you can see, that spike seemed to come out of nowhere but it was mostly around the Facebook announcement of the rebranding to Meta. People rushed into all Metaverse related tokens like MANA etc. Does that price action really look that sustainable to you?
To be clear, I am also really bullish on the Metaverse and think that projects like Decentraland and the Sandbox have amazing potential (a video is coming soon). But the point is that you should always take a look at longer time frames when considering whether short term price action could be sustainable. That’s because periods of consolidation do tend to follow.
This brings me to my last tip, and that’s to soak up the dip. Yes, corrections suck, and they can be terrifying to watch when you have a lot of money invested in the crypto market. However, they are necessary for the bull market to continue, and they offer an opportunity to buy up any coins or tokens you were interested in.
I promise you that when the dominos fall, in most cases you’ll see that out of the 5 or 10 cryptos you wanted, only 1 or 2 of them were really worth your time or money after all. Make sure to watch my video about how to buy the dip so you’re ready when it comes around, and trust me, it will come eventually.
🔥 Deals of The Week 🔥
📈 Top Altcoin Exchange: There seems to be a lot of talk currently about “altcoin season”. But, most of those strong gains are going to come from the lower cap and more exotic altcoins. So, where can you pick up some of these lower cap gems?
Well, Kucoin is probably the exchange for you. Not only are they one of the largest exchanges in terms of trading volume but they also have a plethora of different altcoins on offer.
Even better, I have been able to secure you guys a really special deal which gives you up to 60% OFF trading fees!
Still not sure if Kucoin is for you? Well, I’ve done a dedicated video telling you everything you need to know about this exchange!
👉 Sign up to Kucoin and grab that fee discount of up to 60%!
🚰 New Merch In My Store: Many of you seem to think that I should branch out from just creating cool crypto t-shirts and hoodies. Well, your wish is my command!
Recently, I received a limited order of Coin Bureau branded water bottles. This is exactly what you need to remain hydrated when those markets get really hot. Also, they might just make the perfect Xmas gift for that special someone too!
P.S. By supporting me through my merch store, you are helping my team and I create even better crypto content! So, thanks in advance for your support 🙏🏻
🔮 Video Pipeline 🔮
- Best Crypto Books You Have to Read
- Top 5 Crypto Conferences & Meetups
- ETH Update: More Bullish Than Ever
- The Sandbox: Overhyped or Undervalued?
- Decentraland Update: Any Potential?
- Stablecoin regulations: should you be worried?
🏆 What's New At CoinBureau.com This Week? 🏆
✅ Make a Killing on the Cute and Potentially Lethal PancakeSwap
✅ Revain: The Future of Review Sites is on Blockchain
✅ The Graph: The Future of Decentralized Data Access
That’s about all I have time for this newsletter. However, I would like to thank each and every one of you for joining me and my team on this crazy crypto journey. Honestly, we at the Coin Bureau just feel blessed to be able to play a small role in raising the bar when it comes to crypto education and I hope that you guys will continue to support us on that mission!
Guy your crypto guy
Guy is one of the founding members and face of the Coin Bureau. Like many of us, he is just an average joe who became “crypto curious” back in 2013. After recognising the potential of blockchain technology, Guy set off on a mission to create crypto educational content, working with others to start the Coin Bureau website and released our first video on YouTube in 2019. You can learn more about him in his Who is Guy? blogpost.