AES4

Horst Görtz Institut für Sicherheit in der Informationstechnik

Month: August 2022

Ethereum merge

Posted on by Jorg van Mullen

The important development that’s expected to occur in mid-September is of course Ethereum’s transition from proof-of-work to proof-of-stake also known as the merge.

In case you missed the memo Ethereum’s final merge test net took place last week and it was a massive success so much so that Ethereum developers have bumped up the date for the main net merge.

The Ethereum merge is now expected to occur on the 15th of September and I should note that this is a soft date meaning the merge could occur the day before or the day after.

When you combine this bullish news with what will hopefully be another lower CPI print on the 13th of September you have a recipe for rocket fuel which will take ETH and most other altcoins to the moon. Even though ETH is still more than 50 down from its all-time high in dollar terms it has been gaining against BTC for almost two years and appears to have officially broken out on the weekly chart.

If my measurements are correct ETH could hit 0,1 BTC or more in the coming weeks.

Logically this means that ETH’s price in fiat terms will depend on BTC’s price in fiat terms at that time. Now this is anyone’s guess but previous crypto market cycles suggest we could rally back up to the next zone of price resistance which is anywhere between 30 and 36 k and possibly as high as 38k.

With each ether being worth around 0,1 BTC at that time this translates to an ETH price of 3 to 3,8 k and I reckon additional speculation and hype could possibly push its price into the 4k range which would give ETH a double top for this crypto market cycle just like BTC. Now there are a few things to remember however.

First and foremost this all assumes that the two important inflation prints that occur between now and then come in lower than previous prints which is by no means guaranteed.

Never mind all the other black swans that seem to be swimming around the markets lately. Secondly it sounds like Ethereum’s final hard fork prior to the merge will take place on the 6th of September.

It’s possible that Ethereum developers could discover a bug at this stage which would cause the merge to be delayed. Now this is unlikely but again a possibility and must therefore be accounted for.

Finally the merge is arguably one of the most important events in cryptocurrency.

Expectations are thus extremely high and if these expectations are not met for whatever reason ETH could crash very quickly. There’s also the non-zero possibility of a serious problem showing up during the merge so take nothing for granted.

Is it taxable to move crypto between wallets?

Posted on by Jorg van Mullen

Is it taxable to move crypto between wallets?

Do you have a question about whether or not your wallet-to-wallet transfers need to be taxed?

Many crypto investors have moved their coins to various wallets and exchanges. In certain cases, these sorts of transfers may create tax reporting difficulties.

In this article, we’ll break down everything you need to know about the tax consequences of wallet-to-wallet transfers (as well as a simple approach to avoid future tax difficulties).

What are the tax implications of cryptocurrency?

Cryptocurrency is taxed similarly to other assets, with the exception of capital gains.

Is it subject to tax when I move cryptocurrency from one wallet to another?

It is not taxable to move cryptocurrency between wallets that you own.

The cost basis and holding period of your assets do not alter when you perform a wallet-to-wallet transaction. Your original investment cost will be used as your cost basis. The time you first acquired your coins will be recorded as your holding period.

The IRS, however, does not consider cryptocurrency to be actual currency. This means that you may have to pay taxes on your Bitcoin gains if you sell it. But the good news is that because cryptocurrencies are a type of virtual money and don’t resemble real cash at all when they’re exchanged, they do not incur capital gains tax in the United States.

Is it possible to deduct crypto transfer costs?

In some situations, cryptocurrency costs may be subtracted from your cost basis, resulting in a lower capital gains tax liability.

If your transaction satisfies one of the following criteria, you can typically apply costs to the property’s cost basis.

It is an essential step in the buying or selling of a property.

It increases the property’s real value.

The IRS hasn’t said whether fees for wallet-to-wallet transfers fulfill these criteria. As a result, depending on your risk tolerance, you may take various approaches to record charges for wallet-to-wallet transactions.

If your wallet-to-wallet transaction gives you access to different crypto assets, the aggressive strategy is to use transfer fees to raise your cost basis.

To minimize your tax burden, many experts advise you to treat all wallet-to-wallet transfers as non-deductible since they are not directly connected to purchasing or selling cryptocurrencies.

Is it okay to exchange cryptocurrencies for other currencies in a crypto-to-crypto manner? Is currency trading between different virtual coins taxable?

Moving your cryptocurrency across wallets is not the same as performing a crypto-to-crypto trade, where one currency is given for another. Taxation on crypto-to-crypto trades is distinct from wallet-to-wallet transfers.

Because you’re selling cryptocurrency in a crypto-to-crypto trade, you’ll have a capital gain or loss if the value of your coins has increased since you acquired them.

Why wallet-to-wallet transfers can cause tax issues

While wallet-to-wallet transfers are not taxable, they may result in tax difficulties in certain situations.

Consider the following example.

David’s profit is $5,000 in this scenario. If David hasn’t maintained proper records on his cost basis, it’s probable that the whole proceeds of his sale will be considered a capital gain – in this case, $15,000.