Crypto "Crash"

[TollieKop]

As it goes - death and taxes.

My rule of thumb: if you can make a decent amount of money from something and there isn't tax due on it - it is either illegal (so much worse as definite fines + jail time is on the cards) or it is taxable & you are deliberately avoiding it (fastest way to never get credit again thanks to a SARS judgement (a lekker fine more than likely & some free nought massages in jail if you messed up badly enough).

This helps, cos my smart ass would have tried evasion without knowing the implications

Or well, the legal, but "not good" dodging

 

[Dom]

This helps, cos my smart ass would have tried evasion without knowing the implications

Or well, the legal, but "not good" dodging

Just to help add clarity - evasion is legal (reducing your tax bill through loop holes & clever legal tax practices) & avoidance is illegal (deliberate choices to not disclose your fully taxable income/gains (etc.) even though you know you need to).

 

[TollieKop]

Just to help add clarity - evasion is legal (reducing your tax bill through loop holes & clever legal tax practices) & avoidance is illegal (deliberate choices to not disclose your fully taxable income/gains (etc.) even though you know you need to).

Summed up in 1 sentence what my lecturer couldn't clarify in 1 year

 

[Vleis#7]

True, but those amounts pale into comparison to easy monetary policy decisions.
Remember if capital has very low (or even zero) cost you can borrow money to buy very questionable or speculative assets because the cost of capital is artificially too low, I mean the total crypto marketcap today is a mere 1.6T USD, the FED's balance sheet has grown from 3.7T before the pandemic to 8.7T today, that's a 5T dollar difference so no, stimulus checks alone are not the thing that pumped the crypto market.
That is also why I use the term speculative and not crypto.
The same problem happens with stocks, with interest rates artificially low, why would I buy a 10Y US treasury at 1% yield (at least now back to 1.725%) when I can buy a solid S&P500 company with a 3%+ dividend yield, people were starving for yield, and stocks with nice chunky dividends provided them with that yield, as interest rates rise, this very popular strategy for the past 2 years is going to start to unravel.

Jasssss groot woorde.

Ill just read here & TRY to soak up.

 

[Dom]

Summed up in 1 sentence what my lecturer couldn't clarify in 1 year

Report that lecturer to SARS for tax fraud relating to falsified intellect on a job application.

 

[TollieKop]

Report that lecturer to SARS for tax fraud relating to falsified intellect on a job application.

I can't blame him

Dude had serious chops actually (business owner/accountant with a shit ton of accolades)
I guess he was gatvol of the students he had and he never answered that question I had. Or he would talk a bunch of kak nobody understood (probably correct but I had no idea WTF he said)

 

[LouisABC]

Agreed with Switch.

Not to Mention S&P500 Crash and the Tech stocks crash.

FED definitely has a FUD role to this - but this crash isnt exclusive to the upcoming FED announcement.

9% drop in S&P500 so far from all time high, is not a crash.

Heck, this is mostly profit taking. Ramping up cash reverses, waiting for FED decision.

BTC is down almost 49% from all time high, that is a crash.

EDIT - Then again it is crypto, logic/economic theories do not apply.

 

[Deago999]

9% drop in S&P500 so far from all time high, is not a crash.

Heck, this is mostly profit taking. Ramping up cash reverses, waiting for FED decision.

BTC is down almost 49% from all time high, that is a crash.

EDIT - Then again it is crypto, logic/economic theories do not apply.

Short term 9% sure - last 6 months its down 24% with a further downside predicted (additional 25%)

 

[LouisABC]

Short term 9% sure - last 6 months its down 24% with a further downside predicted (additional 25%)

huh?

You smoking something dude.

S&P 500 - Google Search

www.google.com

So please rather just stop reading You magazine and listing 5 FM for your stock news.

 

[Dom]

9% drop in S&P500 so far from all time high, is not a crash.

Heck, this is mostly profit taking. Ramping up cash reverses, waiting for FED decision.

BTC is down almost 49% from all time high, that is a crash.

EDIT - Then again it is crypto, logic/economic theories do not apply.

Pretty much this - crypto is still a massive anomaly IMHO.

It does follow some basic principles but is incredibly volatile & technically uncontrollable.

 

[Deago999]

huh?

You smoking something dude.

S&P 500 - Google Search

www.google.com

So please rather just stop reading You magazine and listing 5 FM for your stock news.

Ill stick to my You magazine and 5FM if it means I show a level of civility.... try it some time.

 

[TheJudge]

True, but those amounts pale into comparison to easy monetary policy decisions.
Remember if capital has very low (or even zero) cost you can borrow money to buy very questionable or speculative assets because the cost of capital is artificially too low, I mean the total crypto marketcap today is a mere 1.6T USD, the FED's balance sheet has grown from 3.7T before the pandemic to 8.7T today, that's a 5T dollar difference so no, stimulus checks alone are not the thing that pumped the crypto market.
That is also why I use the term speculative and not crypto.
The same problem happens with stocks, with interest rates artificially low, why would I buy a 10Y US treasury at 1% yield (at least now back to 1.725%) when I can buy a solid S&P500 company with a 3%+ dividend yield, people were starving for yield, and stocks with nice chunky dividends provided them with that yield, as interest rates rise, this very popular strategy for the past 2 years is going to start to unravel.

As I understand the issue with the Federal reserve is they've been printing money since the last 2008 crash and handing it to the banks as largely interest free loans, none of that really ever gets into the hands of the poorer folk. So at some point it all has to go boom.

 

[LouisABC]

Ill stick to my You magazine and 5FM if it means I show a level of civility.... try it some time.

you do realize that is 0.55%?

I think you need to go and sit back and really think hard about what you are looking at. Because clearly you don't understand it.

 

[Dom]

As I understand the issue with the Federal reserve is they've been printing money since the last 2008 crash and handing it to the banks as largely interest free loans, none of that really ever gets into the hands of the poorer folk. So at some point it all has to go boom.

Murica created a credit bubble & now want to have a cash bubble - FFS.

 

[moedeez]

As I understand the issue with the Federal reserve is they've been printing money since the last 2008 crash and handing it to the banks as largely interest free loans, none of that really ever gets into the hands of the poorer folk. So at some point it all has to go boom.

Soo, in a nutshell.

https://imgur.com/a/niB5NP0

 

[PJtheKILL3R]

none of that really ever gets into the hands of the poorer folk. So at some point it all has to go boom.

New money almost always go into financial assets first, whoever is nearest to the source of the new money reaps the most benefit and whoever is the furthest away benefits the least, so what typically starts out as a stock / housing bubble with more dollars bidding up existing assets inevitably leads to inflation which hits the poor the most, so in a sense yes.

Another reason inflation has not already wreaked havoc on the US is because since the late 90's the velocity of money has gone down.
Imagine this : We are on a island, there is one shop that sells all the essentials, we both have R1000 available to buy whatever we want from the store, now suddenly you dig up a treasure chest and in it you find R1 000 000 suddenly you can afford to buy all the stock in the shop, you will instantly drive up all the prices as this is a massive increase in demand yet the supply remained stable, and prices unless supply catches up will increase for everything (Inflation), but imagine you found the treasure chest and instead of spending it all you simply went on only buying what you need, our little island economy would be protected from your low velocity of money as that extra money did not lead to more demand.

 

[TheJudge]

New money almost always go into financial assets first, whoever is nearest to the source of the new money reaps the most benefit and whoever is the furthest away benefits the least, so what typically starts out as a stock / housing bubble with more dollars bidding up existing assets inevitably leads to inflation which hits the poor the most, so in a sense yes.

Another reason inflation has not already wreaked havoc on the US is because since the late 90's the velocity of money has gone down.
Imagine this : We are on a island, there is one shop that sells all the essentials, we both have R1000 available to buy whatever we want from the store, now suddenly you dig up a treasure chest and in it you find R1 000 000 suddenly you can afford to buy all the stock in the shop, you will instantly drive up all the prices as this is a massive increase in demand yet the supply remained stable, and prices unless supply catches up will increase for everything (Inflation), but imagine you found the treasure chest and instead of spending it all you simply went on only buying what you need, our little island economy would be protected from your low velocity of money as that extra money did not lead to more demand.

The comment about velocity is interesting because one of the criticisms of what was happening to money being doled out to the banks was that a lot of it was going as far as a company loan used for share buybacks. So the money doesn't circulate but instead pools in the hands of a small group.

 

[PJtheKILL3R]

The comment about velocity is interesting because one of the criticisms of what was happening to money being doled out to the banks was that a lot of it was going as far as a company loan used for share buybacks. So the money doesn't circulate but instead pools in the hands of a small group.

Stock buybacks are not necessarily evil but they do help to enable financial engineering and create scary scenarios for countries, on the surface it seems quite innocent : a company is simply buying back shares it already sold to the public because it thinks the market is undervaluing their shares, lets say they had to sell the shares to raise capital at some point and now a couple years later they are flush with cash they can opt to buy back some shares instead of paying out a dividend and thus give their existing share holders a higher share price and even avoiding that pesky dividend withholding tax.
The value that shareholders then receive from these buybacks will thus only be taxed when they are eventually sold and the gains are realized (And in SA capital gains are also taxed at a lower rate than dividends for individuals : 18% vs 20%), whereas if the company paid me a dividend I would immediately have to pay the dividend withholding tax.

The scary part for countries are that some companies start to think they are too big to fail, so instead of hanging onto some cash for a rainy day or some external world shock event (e.g COVID) they will use a lot of the cash to do stock buybacks with the knowledge that if something really bad ever did happen the government would step in and bail them out, this creates a moral hazard.

The Billionaire playbook typically revolves around never taking a salary (or if you do a really small one) and just borrowing money on a loan account from your company using your shares as the collateral, since its a loan its not taxed as income, and as long as your underlying shares keep going up in value (aided by buybacks) you only have to sell as many as you need to, to pay the interest on the loan, and if you have been holding those shares long enough you will only be taxed at the capital gains rate when selling those shares, not the top marginal tax rate.

 

[TheJudge]

Stock buybacks are not necessarily evil but they do help to enable financial engineering and create scary scenarios for countries, on the surface it seems quite innocent : a company is simply buying back shares it already sold to the public because it thinks the market is undervaluing their shares, lets say they had to sell the shares to raise capital at some point and now a couple years later they are flush with cash they can opt to buy back some shares instead of paying out a dividend and thus give their existing share holders a higher share price and even avoiding that pesky dividend withholding tax.
The value that shareholders then receive from these buybacks will thus only be taxed when they are eventually sold and the gains are realized (And in SA capital gains are also taxed at a lower rate than dividends for individuals : 18% vs 20%), whereas if the company paid me a dividend I would immediately have to pay the dividend withholding tax.

The scary part for countries are that some companies start to think they are too big to fail, so instead of hanging onto some cash for a rainy day or some external world shock event (e.g COVID) they will use a lot of the cash to do stock buybacks with the knowledge that if something really bad ever did happen the government would step in and bail them out, this creates a moral hazard.

The Billionaire playbook typically revolves around never taking a salary (or if you do a really small one) and just borrowing money on a loan account from your company using your shares as the collateral, since its a loan its not taxed as income, and as long as your underlying shares keep going up in value (aided by buybacks) you only have to sell as many as you need to, to pay the interest on the loan, and if you have been holding those shares long enough you will only be taxed at the capital gains rate when selling those shares, not the top marginal tax rate.

Yeah, it was the "too big to fail" scenario that featured prominently in discussions around this.

Thanks for a very interesting read!

 

[PJtheKILL3R]

Thanks for a very interesting read!

My pleasure

 

[EIA]

Seeing as Tax and Crypto is still a bit of a blur , yes I know I must pay tax on it and I am willing to do that but I just want to know when.
Will I only pay tax once I sell my crypto and get ZAR in my bank or do I also pay tax while my BTC is in my wallet going up in value but physically I have not made any money.