Archive for Cryptocurrencies

Bitcoin: on track to our target

By Tomasz Wisniewski, Alpari

We’re keeping an eye on bitcoin once again this week. We analysed the top cryptocurrency a week ago, and unsurprisingly, we were right! At the time of writing my previous piece, bitcoin was above 3,400 USD and we had a bearish outlook, saying that we should go much lower than this, having one particular target in mind. See for yourself:

“The new week started with a test of the broken support as the closest resistance, so a very clean price action movement. So far, the test is positive for sellers, which increases the chances of a further slide towards 2,900 USD (blue).”

Our view was spot on and the price declined sharply, literally straight away! Almost every single day last week ended with lower lows and highs. The new week hasn’t started off any better. We are around 3,200 USD and getting closer to our ultimate long-term target slightly below the psychological barrier of 3,000 USD (blue). Quick reminder: this area was important in May, June, July, and September 2017, so we assume that it will be tested once again pretty soon. Our outlook on BTC remains negative.

Source: Bitcoin: on track to our target

 

Bitcoin Speculators trimmed their cryptocurrency bearish bets for 3rd week

December 15th 2018 – By CountingPips.comReceive our weekly COT Reports by Email

Bitcoin Non-Commercial Speculator Positions:

Large cryptocurrency speculators continued to trim their bearish net positions in the Bitcoin futures markets this week, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on Friday.

The non-commercial futures contracts of Bitcoin futures, traded by large speculators and hedge funds, totaled a net position of -913 contracts in the data reported through Tuesday December 11th. This was a weekly change of 63 net contracts from the previous week which had a total of -976 net contracts.

This week’s net position was the result of the gross bullish position increasing by 329 contracts to a weekly total of 2,227 contracts that more than offset the gross bearish position which saw a gain by 266 contracts for the week to a total of 3,140 contracts.

The speculative bearish position fell for the third straight week and remains at the lowest bearish level since Bitcoin futures trading began in December of 2017.


Small Traders Positions:

The small traders reduced their existing bullish bets by 35 contracts this week to a total of 1,177 net contracts from the previous week which had a total of 1,212 net contracts.

The small trader position has been on a small and steady decline after ascending to bullish levels of +2,000 contracts earlier in the year.


Bitcoin Commercial Positions:

The commercial traders position, hedgers or traders engaged in buying and selling for business purposes, totaled a net position of -264 contracts on the week. This was a weekly change of -28 contracts from the total net of -236 contracts reported the previous week.

The commercials position just started being recorded in the data as of November 27th and has been negative in all three weeks thus far. Previously, the data consisted of just the speculators and the small trader positions.


Bitcoin Futures:

Over the same weekly reporting time-frame, from Tuesday to Tuesday, the Bitcoin Futures (Front Month) closed at approximately $3320 which was a fall of $-520 from the previous close of $3840, according to unofficial market data.

*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) as well as the commercial traders (hedgers & traders for business purposes) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators). Find CFTC criteria here: (http://www.cftc.gov/MarketReports/CommitmentsofTraders/ExplanatoryNotes/index.htm).

Article By CountingPips.comReceive our weekly COT Reports by Email

 

 

 

Fibonacci Retracements Analysis 14.12.2018 (BITCOIN, ETHEREUM)

Article By RoboForex.com

BTCUSD, “Bitcoin vs US Dollar”

As we can see in the H4 chart, after testing the previous low, BTCUSD started a new descending impulse. The downside targets may be inside the post-correctional extension area between the retracements of 138.2% and 161.8% at 3098.00 and 2875.00 respectively. The resistance level is at 3820.00.

BTCUSD1
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

In the H1 chart, the pair has finished the short-term correction; right now, it is trading downwards. However, there is a convergence on MACD, which indicate a new correction to the upside after the instrument reaches the targets inside the post-correctional extension area between the retracements of 138.2% and 161.8%. The local resistance is at 3634.20.

BTCUSD2
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

ETHUSD, “Ethereum vs. US Dollar”

As we can see in the H4 chart, ETHUSD is still trading inside the post-correctional extension area between the retracements of 138.2% and 161.8% at 87.50 and 81.00 respectively. In the future, the instrument may continue falling. The key resistance is the high at 98.04.

ETHUSD1
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

In the H1 chart shows more detailed structure of the current decline. Possibly, the pair may break the low at 81.00 and then continue trading towards inside the post-correctional extension area between the retracements of 138.2% and 161.8% at 74.50 and 70.40 respectively.

ETHUSD2
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Paying with Bitcoin: What You Need to Know

By HoganInjury.com

Image Source

Cryptocurrency, especially Bitcoin, continues to rise in popularity despite its value’s volatility recently; and if you are looking to use bitcoin to pay for things, you have to take due diligence in knowing how to do it, where you can spend, buy, or earn bitcoins, and what the risks and advantages are.

How do you pay with bitcoin?

First, you need a bitcoin wallet. There are free bitcoin wallets available for smartphones and all major operating systems. Just like with a physical wallet, you must always secure it – this means being careful with online services, putting backup and encryption, and putting just small amounts in it for everyday use.

A very common use for bitcoin is for online purchases. Today, there are hundreds of retailers and online shops – even local businesses – that accept bitcoins. Bitcoin can be used to purchase gift cards, videogames, household items; you can also use it in tipping and donating to charity. There are different ways to pay using your bitcoin. You can pay using your wallet or app, via QR code, or pay directly to a bitcoin address. Making a blockchain payment is fast and convenient – and you do not need to key in sensitive information when making a payment.

What are the advantages?

  • Anonymity. Your purchases are discrete with bitcoin, which means they are never associated with your personal identity. In fact, the bitcoin address generated is different for every purchase you make.
  • Low Transaction Fees. Since there is still no government involvement in bitcoin transactions at this point, the costs of transacting are very low.
  • Mobile. Since paying with bitcoin can be done using an app on your mobile phone, you can pay for our purchases anywhere you are as long as you have internet access.
  • No interruptions. Since the bitcoin system is purely peer-to-peer, it is void of involvement of banks, financial institutions, and the government.
  • No Sales Taxes. One major advantage of paying with bitcoin is that no sales taxes are added in your purchases since there are no third parties identify or track them.

What are the risks?

One thing that you need to understand is that bitcoin, no matter how popular it has become at this point, is still experimental. Getting into bitcoin now can mean that you have to deal with the growing pains as it still at the stage in which it is still improving and such improvements may bring about new challenges.

Bitcoin price very volatile. You should look at bitcoin as a high risk asset and you must not keep your savings with bitcoin at this point.

You must adopt good practices in protecting your privacy as bitcoin is not entirely anonymous. Your identity behind the bitcoin address you’re using may be anonymous, but transactions and balances in your address can be seen by anyone.

Bitcoin payments cannot be reversed, so only transact with people you trust and business that have already established their reputation. Beware of scams, fake ICOS, and fraudulent activities.

Contact us at Hogan Injury for expert legal advice.

None of the content on Hoganinjury.com is legal advice nor is it a replacement for advice from a certified lawyer. Please consult a legal professional for further information.

 

Bitcoin Tax Calculator

This article first appeared on TaxAct.

If you are a U.S. resident that invested in Bitcoin or other cryptocurrencies in 2017, you may have recently received a tax document from the trading platform or cryptocurrency exchange you use and may need to pay taxes. While there is currently very little guidance on the taxation of cryptocurrency, one thing is clearly defined. The Internal Revenue Service (IRS) views cryptocurrency as property for tax purposes. That means you likely received a tax document because you either experienced a capital gain on that virtual investment in 2017 or received cryptocurrency as compensation, which is seen as ordinary income to the IRS.

For practical purposes, the IRS has issued guidance defining cryptocurrency such as Bitcoin and Ethereum as virtual currencies.  This guidance is subject to interpretation, but for most people the main things to consider from a tax perspective are:

  1. How long you held your Bitcoin or other cryptocurrencies from purchase to sale?  If held for less than a year, any profit may be liable for short-term capital gains tax.  If held for longer than a year, any profit may be liable for long-term capital gains tax.
  2. What is your tax filing status and taxable income?  That will determine your tax bracket and the tax rate on any Bitcoin profits.
  3. What is your state tax rate?  That will determine how much you may owe in state taxes.

Bitcoin Tax Calculator Instructions

Part 1: Enter Your Personal Details

Step 1: Select the tax year you would like to calculate your estimated taxes.
Step 2: Select your tax filing status.
Step 3: Enter your taxable income excluding any profit from Bitcoin sales.  For most people, this is the same as adjusted gross income (AGI).
Step 4: Enter your state’s tax rate.

Part 2: For each Bitcoin sale within a tax year

Step 1: Enter the purchase date and purchase price.  The purchase date can be any time up to December 31st of the tax year selected.
Step 2: Enter the sale date and sale price.  Make sure the sale date is within the tax year selected.
Step 3: Repeat for all Bitcoin or cryptocurrency sales within the tax year selected.

Bitcoin Tax Calculator

Example Bitcoin Tax Situation

This example calculates estimated taxes for the 2018 tax year for a person that made two sales.  All values are in USD.

Person A Tax and Finance Details

2018 Taxable income – 80,000
2018 Filing Status – Single
2018 State tax rate – 5%

Transaction #1

On Feb. 1, 2018, Person A sold Bitcoin for a total of $10,000.  That Bitcoin was previously purchased on June 1, 2017 for $5,000.  Since it was held for less than a year, the $5,000 profit is subject to short-term capital gains tax rates.  Based on Person A’s filing status and income, the taxes are calculated as follows:

  1. The first $2,500 in profit is taxed at the 22 percent federal tax rate.
  2. The remaining $2,500 is taxed at the 24 percent federal tax rate.
  3. The entire $5,000 taxed at the 5 percent state tax rate.

$2,500 X 22 percent + $2,500 X 24 percent = $1,150 federal taxes owed on short-term capital gains

$5,000 X 5 percent = $250 state taxes owed

$1150 + $250 = $1,400 total tax liability for transaction #1

Transaction #2

On Mar. 1, 2018, Person A sells Bitcoin for a total of $10,000.  That Bitcoin was purchased on Feb. 1, 2017 for $3,000.  Since it was held for longer than a year, the $7,000 profit is subject to long-term capital gains tax.  In addition, Person A’s taxable income is now calculated at $85,000 to include the income from the previous sale.  The taxes are calculated as follows:

  1. The entire $7,000 is taxed at the 15 percent long-term capital gains tax rate.
  2. The entire $7,000 is taxed at the 5 percent state tax bracket.

$7,000 X 15 percent = $1,050 federal taxes owed onlong-term capital gains

$7,000 X 5 percent = $350 state taxes owed

$1,050 + $350 = $1,400 total tax liability for transaction #2

Total Taxes Owed

Since both long-term and short-term capital gains are positive, the total taxes owed are calculated as follows:

$1,150 federal short term capital gains + $1,050 federal long term capital gains + $600 state taxes owed = $2,800 total taxes owed

This article first appeared on TaxAct. Source: https://blog.taxact.com/bitcoin-tax-calculator/

 

 

 

Bitcoin: this year will end differently than in 2017

By Tomasz Wisniewski, Alpari

Time to deal with bitcoin again. I last mentioned this instrument on the 19th of November, when the price was slightly above 5,200 USD. We had a fresh sell signal after the breakout of the 6,000 USD support. Our analysis was spot on, the price fell like a rock! It has now been almost a month. Has anything changed here?

I think that the current low prices have created a situation where the casuals have already lost interest in this instrument, but fans of the technology and professional traders are starting to look for buying opportunities. In my opinion, we are not there yet and we should experience a further decline. The most recent development since the support at 6,000 surrendered is the descending triangle pattern (orange). In a downtrend, this kind of a formation is a very strong bearish factor. No surprise then that BTC broke the lower line of this pattern and continued downwards.

The new week started with a test of the broken support as the closest resistance, so a very clean price action movement. So far, the test is positive for sellers, which increases the chances of a further slide towards 2,900 USD (blue). That is our mid-term target for this instrument. In my opinion, the chances that we will get there are very high.

Source: Bitcoin: this year will end differently than in 2017

 

Fibonacci Retracements Analysis 07.12.2018 (BITCOIN, ETHEREUM)

Article By RoboForex.com

BTCUSD, “Bitcoin vs US Dollar”

As we can see in the H4 chart, BTCUSD has broken the previous low; right now, the long-term decline continues. The downside targets may be inside the post-correctional extension area between the retracements of 138.2% and 161.8% at 3105.00 and 2875.00 respectively. The resistance level is the high at 4405.56.

BTCUSD1
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

In the H1 chart, the downtrend continues. However, there is a convergence on MACD, which indicate a new correction ti the upside after the instrument reaches the targets inside the post-correctional extension area between the retracements of 138.2% and 161.8%.

BTCUSD2
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

ETHUSD, “Ethereum vs. US Dollar”

As we can see in the H4 chart, ETHUSD has broken the previous low and reached the post-correctional extension area between the retracements of 138.2% and 161.8% at 87.50 and 81.00 respectively. In the future, the instrument may start a new pullback. The key resistance is the high at 125.51.

ETHUSD1
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

As we can see in the H1 chart, the convergence made the pair start a new pullback. The target may be the previous low at 98.04, which is now the resistance level.

ETHUSD2
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Will We See the Cryptocurrency Industry Boost Any Time Soon?

By Mary Ann Callahan

The price charts at crypto websites have reflected a strong downwards trajectory for most of 2018. Is cryptocurrency dead? Is the market just taking a breather? Let’s look at what is going on in terms of fundamentals and sentimentals.

Market needs to let off steam

After a meteoric 2017, it was only natural that the crypto market would need to cool down a little. Nothing goes straight up indefinitely!

Much of the price appreciation experienced at the end of last year was caused by a media-fueled, retail-investor speculative frenzy. Think about it. At the start of last November, the price of a single Bitcoin was around $7,300. Just a month and a half later, the price was over $19,000. Meanwhile, altcoins such as Ether and countless others experienced even larger percentage gains. These are not the hallmarks of a rational market.

Of course, there were fundamental factors that drove the formation of the end-of-year bubble. The successful activation of SegWit – a network upgrade intended to help Bitcoin scale – and the subsequent Bitcoin Cash hard fork seemingly providing a resolution to the ongoing scaling debate drove much of the early market optimism in the summer of 2017.

Meanwhile, the initial coin offering phenomena encouraged a hugely speculative environment around the whole space. With early examples such as Ethereum itself proving massively profitable for pioneer investors, a slew of companies with many dubious ideas (and some good ones) promised to sell literally anyone company tokens for established cryptocurrencies in entirely unregulated sales. Companies raised hundreds of millions of dollars and some traders undoubtedly made a bundle on the wildly volatile markets.

These two factors came to a head around this time last year. Driven by mainstream media coverage of the massive gains of early Bitcoin, altcoin, and ICO investors, an influx of largely uninformed retail investors piled into the market. Many had little idea of what they were buying, and a massive case of “FOMO” (fear of missing out) occurred.

Fundamentals are strong

Recently, the volatility of Bitcoin and other cryptocurrencies has dropped immensely. Many commentators believe that the market has found its bottom. Although it is impossible to say for sure when it will reverse, there are certainly plenty of developments on the horizon that are bullish for the industry and, by extension, the prices of the leading crypto assets.

Bakkt

One of the biggest news events of this year is undoubtedly the Bakkt platform. Due for launch in mid-December, the announcement of trading venue, custodial solution, and payments facilitator is particularly exciting because it is being launched by the owner of the New York Stock Exchange, the Intercontinental Exchange (ICE). Other big names associated with the venture are Microsoft, Starbucks, and the Boston Consulting Group. Such large prestigious names are exactly the kind that the planet’s largest investment firms trust enough to take a new asset class seriously.

Fidelity Investments

In a similar ilk to the Bakkt launch is a cryptocurrency endeavour from another of the planet’s biggest names in investments. Fidelity Investments manages more than $2.1 trillion in assets. It’s also more than a little interested in digital currencies. This October, the company announced the launch of Fidelity Digital Assets – a custody, trading, and general 24-hour, white-glove service for the planet’s wealthiest investors to get into the crypto market.

Not only has Fidelity Investments been working towards launching their own cryptocurrency infrastructure services for the most sophisticated class of investor, but the multinational money management firm has also mined digital assets for over three years now.

Bitcoin ETF

Much of the cryptocurrency narrative of 2018 has been about a Bitcoin Exchange-Traded Fund in the US. The green-lighting of the highly-lauded ETF is thought to be useful in providing an additional nod from one of the most powerful financial regulators on the planet. The SEC has been taking their time in approving the first venue for the potential crypto derivative. However, many in the space believe that the ETF is coming early next year when the deadline for the most anticipated fund proposal draws near.

Other custody and trading desk solutions

If all that wasn’t enough, there have been many other firms also offering their own institutional-level packages to the market all year. These range from trading desks for massive money managers to take up positions in the space to custody solutions so that they can be assured of the safest storage possible for their funds. The likes of Coinbase, Circle, Blockchain, and Goldman Sachs are all in the process of releasing, or have just released, such services to the market.

The sheer number of tailored institutional buying and storing options coming highlights a massive demand for cryptocurrency from established money managers.

Lightning

Of course, it’s not all about institutional interest in leading cryptocurrencies. The biggest digital asset of all is currently undergoing something of an upgrade. The Lightning Network has already been launched for Bitcoin and some of the world’s most accomplished developers are currently putting the software through its paces for bugs and exploring what is possible with the innovation. Eventually, the plan is to allow a cheap, fast, and confidential payment rail on top of the Bitcoin base network. This will further increase the functionality of the original crypto and will allow a host of new use cases involving micropayments.

Dapps gaining traction

After a shaky start for most decentralized applications built on the Ethereum blockchain and other smart contract platforms, it seems that some projects are finally starting to take off. Take the decentralized prediction market that is Augur. There was almost a $1 million bet on the US mid-term election result!

If more applications can prove their utility, it will show that platforms such as Ethereum can see a massive adoption across industries.

To conclude

Ultimately, it is impossible to say when the cryptocurrency market will turn around. That said, the fundamentals of the space are good, but the retail market is still licking its wounds from the mania last year. Meanwhile, institutions will likely take up positions using the many tailored services coming to the market. Once a couple more big names get linked to Bitcoin and others, the industry might shift gears.

About the Author: Mary Ann Callahan

As an expert on Bitcoin-related topics, I’ve found myself as a Journalist at Cex.io – cryptocurrency exchange. I’m working on articles related to blockchain security, bitcoin purchase guides or bitcoin regulations in different countries.

 

 

Will cryptocurrencies offer safe haven if global economy slows?

By George Prior

Cryptocurrencies like Bitcoin and Ethereum will increasingly be seen as investors’ ‘safe havens’ in 2019, affirms an influential tech expert.

The comments from Ian McLeod of Thomas Crown Art, the world’s leading tech-art agency, follow growing concerns that the global economy is likely to experience a significant slowdown before the end of 2019.

Leading economic indicators tracked by the OECD have weakened since the start of the year and suggest slower expansion over the next six to nine months.

Similarly, the wider global expansion that began roughly two years ago has plateaued and become less balanced, according to the International Monetary Fund.

Mr McLeod observes: “There’s a growing list of investment tailwinds to consider for 2019. These include significant trade tensions, rising interest rates, political uncertainties, including Brexit, and complacent financial markets.

“The U.S., the world’s largest economy, has, of course, considerable influence on Asian and European economies. As such, should the U.S. stock market plunge – as it did recently scrapping all of its 2018 gains during a major sell-off – global markets are vulnerable too.”

He continues: “Against this backdrop, we can expect cryptocurrencies will increasingly be seen as investors’ ‘safe havens’ in 2019 and beyond.

“When the downside of the economy hits, digital assets cryptocurrencies like Bitcoin and Ethereum are likely to be viewed by investors as a robust means of storing wealth, in the same way they do with gold.”

Mr McLeod adds: “There are several keys reasons why the likes of Bitcoin and Ethereum will be safe havens.  These include scarcity, because there’s a limited supply; permanence, they don’t face any decay or deterioration that erode their value; and future demand certainty as mass adoption of cryptocurrencies and blockchain, the technology that underpins them, takes hold globally.”

Of this latter point, he comments: “As mainstream adoption is going to dramatically gain momentum in 2019 as the world, especially business, realise ever-more uses for and value of crypto and blockchain.

“Ethereum’s blockchain, for instance, is used in our art business.  It has allowed us to create a system to use artworks as a literal store of value; it becomes a cryptocurrency wallet.

“It also solves authenticity and provenance issues – essential in the world of art.  All our works of art are logged on the Ethereum’s blockchain with a unique ‘smART’ contract.”

The tech expert concludes: “We are some way off from cryptocurrencies replacing the Swiss Franc, the Japanese Yen or gold as the preferred safe haven assets.

“However, as the world moves from fiat money to digital, and as adoption of crypto picks up, there can be no doubt that cryptocurrencies will be firmly in the pantheon of safe haven assets within in the next decade.”

 

Bitcoin and Taxes: What You May Not Know

This article by Valerie Rind first appeared on TaxAct.

You might be aware that your Bitcoin or other cryptocurrency transactions have a possible taxable impact. However, you might not know exactly how to report them. You can use this bitcoin tax calculator or read on for more guidance on cryptocurrency taxes.

What is Bitcoin?

Bitcoin is a worldwide payment system where users buy virtual currency using an exchange. The Bitcoins are stored in a digital wallet and can be transferred using a mobile app. No bank or other intermediary institution is involved.

Bitcoins can be used as a digital currency to send or receive funds, pay for goods or services, or simply for investment.  Transactions are anonymous and are tracked only via the digital wallet identifiers on a public ledger. Originally used by illicit operators, mainstream companies such as Overstock.com now accept Bitcoin as payment.

Enter the IRS

The Internal Revenue Service (IRS) isn’t blind to Bitcoin and provided guidance about “convertible virtual currency” in its Notice 2014-21.

The IRS defined convertible virtual currency as virtual currency that has an equal value in real currency, or that is a substitute for real currency.

The IRS specifically referred to Bitcoin as a type of convertible virtual currency that can be digitally traded. In addition, you can buy or exchange virtual convertible currencies into U.S. dollars or other real or virtual currencies. However, virtual currency itself does not have legal tender status in the U.S.

Tax Liability

“Though cryptocurrencies seem like a brand-fangled new investment, one with which our, by comparison, antiquated tax system can’t compete, they are actually taxed like pretty much any other mundane item,” emailed Mark Durrenberger, Certified Financial Planner®, Enrolled Agent and author of The Modern Day Millionaire.

If you sell, exchange, or use convertible virtual currency to pay for goods or services, you might have a tax liability. For tax purposes, the IRS treats convertible virtual currencies as property. If you receive Bitcoin as payment for goods or services you provide, then when you compute your gross income, you must include the fair market value of Bitcoin in U.S. dollars as of the date you received the Bitcoins.

Durrenberger gave the following example:

“If you buy Bitcoin for $100, and later sell it for, say, $1,000, [y]ou would owe capital gains taxes on that $900 gain. If you held that Bitcoin for less than one year, the tax rate would be whatever rate you pay on your regular income. If you held it for longer than one year before you sold, you are taxed at the more favorable (i.e., lower) long-term capital gains rates,” Durrenberger said.

Fair Market Value

How would you determine the fair market value of Bitcoin? “It can get a bit tricky as the value of Bitcoin jumps and dips constantly and those changes can be quite drastic at times,” emailed David Hryck, a tax lawyer, and partner at Reed Smith in New York City. “You will have to convert the Bitcoin value to U.S. dollars as of the date each payment is made.”

In this world of anonymous payments, recordkeeping of your transactions might be a challenge. “Make sure you keep careful records of the dates and value,” Hryck said.

Independent Contractors

If a company or individual pays you in Bitcoins for services you performed as an independent contractor, you might wonder if it constitutes self-employment income.

According to the IRS, self-employment income includes all gross income from any trade or business you engage in, other than as an employee. The fair market value of Bitcoins you receive for your services (measured in U.S. dollars as of the date you receive payment) is self-employment income and consequently is subject to self-employment tax.

Reporting to the IRS

You might wonder how to report your Bitcoin or other cryptocurrency transactions on your annual tax return.

The basic tax rules that are applicable to property transactions apply to transactions using virtual currency. The IRS has made it clear that Bitcoin is a type of property and your transactions must be reported.

You should file Form 8949, Sales and Other Dispositions of Capital Assets and Schedule D (1040), Capital Gains and Losses, with your annual tax return to reflect your cryptocurrency transactions.

Failure to Report

What will happen if you skip reporting your Bitcoin or other digital currency transactions on your tax returns? Will the IRS know?

The fact that in 2014 the IRS issued a comprehensive notice including a Q&A section shows that the IRS is well aware that Bitcoin and other cryptocurrency transactions are more than a passing fad. As with any tax law or IRS rules, you assume certain risks if you fail to comply.

This article by Valerie Rind first appeared on TaxAct

Source: https://blog.taxact.com/bitcoin-and-taxes/