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RE: Crypto Investing Basics - Bitcoin and Tax in Australia (Part One)
really interesting, perhaps you could take a look at the tax implictations of using Crypto as a loan vehicle for those who don't conventionally trade in the sense that they purchase but never sell. So if you buy a bitcoin, then years later it's worth a ton of money but you never sell it and instead just draw a loan against it using it as equity for the loan. Presumably there's no tax against loans because loans aren't income, and there's no tax if you don't sell an asset, and tax is only due when you do sell it?
Have you heard of the cryptocurrency lending platform salt? It does exactly this, allowing you to use your crypto as collateral for a loan in fiat currency.
Yeah, funnily enough it did come up on a video about ten interesting altcoins that I watched a couple of week ago but the guy was talking about their ICO and why he didn't put in was he was concerned about the regulatory aspects of issuing loans. I'd forgotten about it until today. It is a really good concept, I hope it takes off because it would be useful
I looked at it but initially the interest rates they were charging and some other things put me off. Having thought about it some more, if they can get the business model right then once the market settles down over the next few years, then potentially the lending rates and other stuff comes down to make it a more viable proposition. I might need to look into it again.
Hi @angusg
I think your concept is essentially sound. As you mentioned before, its the way a lot of property investors run their portfolios. You are 100% correct that if you don't ever sell, then you don't ever crystalise the gain so there is no tax.
The loan side is also an evolving concept. Again I think you are onto something here. There are a couple of projects exploring this as we speak. The problem at the moment is the volatility in the market. Because the volatility of crypto assets is so high, the interest rates and collateral requirements to get a loan backed by crypto make it unworkable (IMO). I read something the other day that said you currently have to provide 2 BTC as collateral to get a loan for 1 BTC worth of fiat. As the market matures and the prices get more stable some of these issues will go away.
Cool, I guess that's not to bad tho for HODL'rs, if you never intend to sell your Crypto asset but just want to draw down a small loan I could see it being viable for people. For example last year Bitcoin rose 700 percent, Litecoin rose 2,950 percent and Verge I think rose a lot faster. So say you bought $1,000 of crypto when a coin was trading around 1/10 of a cent then it went up to $1 or $2 you would probably have a profit that is way above what your living costs might be.
In a scenario like that I see it as pretty useful that you wouldn't necessarily want to sell your asset or even get a loan for most of it, especially if it was still an asset that was rising tremendously in value. However say you'd made a million dollars out of it but just wanted to draw down living costs of around $40,000 even if the lender's requirement was 2:1, you could just stake the 2:1 that you needed for the draw-down and still keep the balance of your asset under private control in a wallet with your own keys.
I'm starting to see it as a very viable way to live. Of course assuming that Crypto keeps rising and that the bankrupt US dollar doesn't force the US government into a phase of regulation and then issuance of their own Fiat crypto dollar. Apparently if there was a run on the US banks today there isn't enough physical cash to cover even a tiny 1% fraction of withdrawals and Governments will do the darkest sxxx possible when it comes down to it if their survival is impacted. That's something that could realistically be on the Horizon because there are so many more pensioners living longer in all the Western countries and declining birth rates and declining rates of taxpayers in the productive bracket to fund everyone else.
My bug out plan for this year is to make a squillion dollars in Crypto and then at least just buy a modest house somewhere and set aside a couple of years of canned goods. When SHTF and everything collapses and the power goes out at least I'll lose my squillion but still have a place that I can board up and fight off zombies, and I from what I hear when the lights go out, cans of Tuna will be the new gold standard.
have you been watching doomsday preppers? If not you shoulf. You'd love it!!!