Crunch time for Bitcoin support as US Senate muddies water on crypto tax
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It’s an interesting time to be Bitcoin. Having pulled back below the $US40K zone once again, the no.1 digital asset is in retest mode, while the US infrastructure bill and its last-minute crypto-tax addition is causing confusion.
As reported by CoinDesk today, an updated draft of the US Senate’s bipartisan infrastructure bill has expanded the definition of “broker” to seemingly include nearly every entity in crypto. “Seemingly”, because it’s not 100 per cent clear from its wording who the bill, if passed, would ultimately affect.
The late tweak to the infrastructure bill has been added for the purpose of raising US$28 billion via taxes on cryptocurrencies.
A prominent US lawyer within the crypto space, Jake Chervinsky, of Compound Labs, pointed out on Twitter that the bill could have tricky implications for crypto miners and DeFi operators.
3/ This definition is so broad, it could apply to nearly every economic actor in the US crypto industry, if read literally.
That includes PoW miners & PoS validators, since "providing a service to effectuate transfers of digital assets for consideration" seems to fit both.
— Jake Chervinsky (@jchervinsky) July 30, 2021
In his 21-tweet stream, Chervinsky said that the current tax code “requires brokers to comply with IRS reporting requirements. Most importantly, they have to give Form 1099s to their customers & file them with the IRS, too.”
The lawyer said that it’s “literally impossible for non-custodial actors like miners to get the information they need” to fill out these forms. “In practice,” he said, “this could mean a de facto ban on mining in the USA.”
While it all sounds particularly alarming for the broader cryptocurrency industry, and is certainly causing a mixture of confusion and consternation on Crypto Twitter, Chervinsky did add that it’s not quite time for panic stations.
17/ So, what can we do?
To start, don't panic. This provision isn't final yet & still can be changed.
Even if it passes as-is, it shouldn't take effect until 2023 at earliest, so at least we'll have time to try to undo it, in Congress or the courts. This may be a long fight.
— Jake Chervinsky (@jchervinsky) July 30, 2021
Maybe US Bitcoin-mining operations won’t need to pack up their rigs by the thousands and hang out with Borat any time soon after all. In fact, sections of the mining industry seem downright unfazed by the ambiguous nature of the Senate proposal…
One of the largest bitcoin miners in North America, Marathon, just spent $120 million on 30,000 more bitcoin mining machines.
The strongest computing network in the world is only going to continue to get stronger over time.https://t.co/aVDoKIWMWV
— Pomp 🌪 (@APompliano) August 2, 2021
Leading into the weekend, crypto analyst Rekt Capital suggested Bitcoin needed a weekly close above US$39,000 to stand it in good stead this week. Despite BTC heading back below US$40K late on Sunday, that’s still a tick then.
The retest of the $US39K zone is still presently on, which the analyst views as a crucial area of support for further upside in the short term.
The blue trendline resistance is what stands in the way of further upside
Bitcoin will be able to breakout beyond the blue trendline resistance if $BTC is able to turn the red area (~$39000) into support like it did back in early February 2021#Crypto #Bitcoin https://t.co/IWcliWxOOg pic.twitter.com/1iRBMTwHYO
— Rekt Capital (@rektcapital) August 2, 2021
At the time of writing, Bitcoin is trading at US$39,740, having slipped as low as US$39,192 about four hours ago.
While lower levels of support in the US$34.5K to US$36K zone are also being bandied about by respected analysts, everything seems to be going to Rekt Capital’s plan for the moment.
Although PlanB’s ultra-bullish plan is another matter…
#bitcoin realized cap is rising again! Realized cap is the average price at which all 18.77M BTC were last transacted (calculated over all utxo's). Also, the few sellers at the moment sell at a profit (not a loss like in May and June). IMO this is bullish. pic.twitter.com/q3mhSZ19oH
— PlanB (@100trillionUSD) August 1, 2021
Bits and pieces happening in the wide world of crypto today…
• GoldenTree Asset Management, a multi-billion-dollar New York-based hedge fund, has reportedly added Bitcoin to its balance sheet. The herd is com… hang on, it’s here.
• Saudi Aramco, the world’s biggest oil producer has denied reports it’s moving into Bitcoin mining. It’s still invested in at least two blockchain companies, however.
• Glassnode data suggests that active Bitcoin addresses have surged by 30 per cent in late July, with the number of holders with 100 to 10,000 BTC hitting an all-time high.
• South Korean regulator, the Financial Services Commission, is planning to shut down 11 mid-sized crypto exchanges in the country due to “illegal activities”, according to reports.
• PayPal, which has been making big cryptocurrency-based operational moves in recent weeks, is now looking to hire recruits for crypto-related posts in Ireland.
The crypto market cap charts’ perennial second-in-command, Ethereum, is still looking particularly strong at press time, up 4.3% in the past 24 hours and changing hands for US$2,659.
Cross-chain liquidity protocol THORChain (RUNE) continues its strong recent recovery, and is up 9.77% in the past 24 hours, making it the best performer on the day in the top 100 by market cap. It’s sitting bang on $7 at press time.
Highly rated high-speed blockchain for smart contracts, Elrond (EGLD), is also having a nice move – up 8.59%, and trading for US$95.78, with Terra (LUNA) not far behind it, up 7.06%.
No time for losers? We’ve got time for three. Solid projects all, they’re only daily losers. Decred (DCR), which is a payments-protocol rival of sorts to XRP, is down 9.55% in the past 24 hours; NFT and gaming-focused blockchain Flow (FLOW) is down 6.78%, and decentralised cloud-storage platform Siacoin (SC) is 6.99% in the red.