If these levels break, $20k $BTC & $1k $ETH, we can expect massive sell pressure in the spot markets as dealers hedge themselves. We can also expect that there will be some otc dealers and that will be unable to hedge properly and might go belly up.
Traders taking excessive risk in the unregulated cryptocurrency market being forced to sell when prices go down were in large part responsible for last week's 30% drop in prices and outages for major exchanges, according to analysts. A burgeoning bitcoin lending market is also adding to the volatility.
I was convinced to sell all my Altcoins
When traders use margin, they essentially borrow from their brokerage firm to take a bigger position in bitcoin. If prices go down, they have to pay the brokerage firm back in what's known as a "margin call." As part of that, there's often a set price that triggers selling in order to make sure traders can pay the exchange back.
"Selling begets more selling until you come to an equilibrium on leverage in the system," said JMP analyst Devin Ryan. That selling begins to "compound" as leveraged positions are liquidated, because they can't meet those margin requirements, he said.
"As you hit a certain collateral level, firms will automatically sell your bitcoin and send the collateral to the lender," BKCM's Brian Kelly said. "This adds to the massive cascade effect -- there was so much volume that most of the exchanges broke."
MicroStrategy could avoid being forced to sell its bitcoin at a lower price than it bought it if the company adds more collateral to its loan, he said. "Before it gets to 50%, we could contribute more bitcoin to the collateral package, so it never gets there, so we don't ever get into a situation of a margin call."
In March, MicroStrategy took out a $205 million bitcoin-collateralized loan with Silvergate Bank to purchase more bitcoin. The software company's total bitcoin holdings are now worth more than $5 billion and have an average cost basis of about $30,700. Earlier this year, CEO Michael Saylor said he doesn't plan to ever sell MicroStrategy's bitcoin stash.
These exchanges allow consumers buy, sell, and trade cryptocurrencies, whether through fiat currency like dollars, euros, or yen, or another cryptocurrency like bitcoin or ether. Less common cryptocurrencies, called altcoins, often must be traded against bitcoin and cannot be purchased directly with fiat currency. Not every exchange supports every coin, and many investors use more than one platform.
Founded in 2012, Coinbase is a wallet, an exchange, and a set of tools for merchants, all built on the same platform. Most consider it to be the blue-chip among crypto platforms. Users can buy, sell, store, and trade tokens, and Coinbase partners with companies like Expedia, Overstock.com, and Dish who want to accept bitcoin payments.
BitMEX is unique in that it offers leveraged contracts (futures contracts and perpetual contracts) that are bought and sold using bitcoin rather than direct ownership of coins themselves. This means that even if users trade in altcoins, all profits and losses will be in realized in bitcoin. BitMEX does not handle fiat currency and is not available to customers in the United States.
The exchange has a relatively small selection of coins but is known for its commitment to cooperating with regulators. As such, it does not offer short selling or trading on margin. The exchange holds US Dollar deposits in FDIC-insured banks. Digital assets are held in a trust on the customer's behalf.
As just noted, different capital gains rates will apply depending on how long you own cryptocurrency. If you want to lower your tax bill, hold your cryptocurrency long enough to turn your short-term gains into long-term gains. It may not be an easy task, but if you have the patience and fortitude to keep your crypto for at least a year before selling, then you'll likely pay a reduced tax rate on any capital gain.
Closely related to selling your appreciated investments in a low-income year, another tried-and-true tax minimization strategy involves lowering your taxable income. This means scouring the tax code for tax deductions and credits that can bring your taxable income down.
The IRS allows you to gift up to $16,000 per year per person without tax consequences. While the basis in the cryptocurrency transfers to the new owner, the recipient might earn a low enough income where they won't pay taxes on the appreciated property when sold. Or, at the very least, less in taxes than you might have to pay were you to sell the cryptocurrency yourself.
When you donate an asset, you can claim the appreciated fair market value at the time of donation as a deduction against your taxable income. For example, if you own $50,000 worth of Bitcoin and choose to donate it to a charity you regularly support, you may be able to write this off as a charitable deduction on your return. Further, if the charitable organization qualifies as a tax exempt 501(c)(3) charity, it won't need to pay capital gains taxes when it sells the donated cryptocurrency later.
The final crypto tax minimization strategy on this list is to bequeath your crypto assets as part of your estate. When you pass away, the investment will receive a "step up" (i.e., increase) in basis to its fair market value at the time of your death. This way, your heirs will not need to pay taxes based on your original basis when they sell the cryptocurrency they inherited.
You can buy or sell crypto on a trading platform using money. Or buy or sell it directly.Crypto is kept in a unique digital or software wallet (hot) or hardware (cold) wallet. Each wallet has private keys (unique codes) that authorise transactions on the blockchain network.
A software wallet is held by an individual or by a crypto trading platorm on your behalf. This can simplify buying, selling and storing crypto, but is not a regulated service. So you may not be able to recover the crypto if the trading platform fails.
Many crypto-assets and other digital assets are not commonly considered to be financial products. Because of this, the platform where you buy and sell crypto may not be regulated by ASIC. So you may not be protected if the platform fails or is hacked.
Times are bad, which means, by the perverse logic of American capitalism, stock markets and speculative investments are flourishing. Bitcoin, the digital currency whose value is pegged to nothing but the amount its adherents are willing to pay for it, is at an all-time high, approaching $29,000 at the end of 2020. For those who held on and defended Bitcoin during its fallow periods, its time seems to have finally come, particularly as PayPal promises to allow customers to start buying and selling cryptocurrencies next year.
The best case scenario is to market sell my Bitcoin despite the consequences. I click the big red button, and the market suffers a stroke as my orders cause a whiplash. A majority of my crypto sells at the market price, but 10% sells below it.
Other potential applications include a platform where traditionally illiquid assets are represented and traded through blockchain-powered tokens. Organizations like 0x Project are pitching a decentralized asset market, where you can buy, sell, and trade fractional ownership of high-value paintings, real estate, and companies via interoperable databases, without any kind of intermediary.
Elsewhere, altcoins are trending upwards as well. Solana (SOL) spiked 44% in the past month following the release of a solana-based meme token called Bonk. Polygon (MATIC) surged 19% in the past week on news of an upcoming software upgrade.
Stadelmann added: "FTX held [zero] BTC, so we shouldn't see any liquidation events directly from that. However, large institutions that had a portion of their funds on FTX might be forced to sell their assets held in other places, which might include BTC."
Cryptocurrency exchange Coinbase teased an opening of the shitcoin floodgates today with an announcement that it will allow issuers of obscure altcoins, tokens, and even digital collectables like CryptoKitties to officially apply to be listed on its exchange.
The rise of decentralised finance (DeFi) has changed the way we buy and sell cryptocurrencies. One of the essential ways in which any DeFi protocol operates is by using what's known as an automated market maker (AMM).
Before diving into the topic of AMMs, it's important to understand how regular market makers operate. In a traditional financial market, like the stock market, market makers are trusted parties who provide liquidity between buyers and sellers.
Throughout most of history, centralised exchanges served to match buyers and sellers together. However, if there's not enough liquidity on the market to instantaneously match buy and sell orders, that's when slippage can occur, which is when an asset's price shifts before the trade is completed.
An automated market maker (AMM) is a system that automatically facilitates buy and sell orders on a decentralized exchange. In contrast to regular market makers, AMMs function by using self-executing computer programs, also known as smart contracts. These smart contracts automatically clear transactions between buyers and sellers.
The use of AMMs also eliminates the need for another participant when making a trade. Instead, buyers and sellers can trade directly with an AMM and its algorithm, which determines the price of a cryptocurrency you want to trade.
This is especially important for the altcoin market, where certain altcoin tokens have low liquidity. Using an AMM, you trade whatever cryptocurrency you want without needing another buyer or seller to deal with directly. In contrast, centralised crypto exchanges like Coinbase or Binance don't use AMMs..
Liquidity pools typically take just two cryptocurrencies that are exchanged amongst each other, similar to how forex traders buy and sell currency pairs. For example, a trader can sell BitcoinBitcoin (BTC) to buy Ether (ETH) and vice versa from a BTC/ETH liquidity pool using an AMM. 2ff7e9595c
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