Crypto Newsletter Jan '24
Bitcoin's price & ETF, big crypto tax changes and a new in-person event for the DCG!
This newsletter covers current headlines within the crypto space, my opinion on them and projects & people I find interesting. Also included is information about important crypto community events both locally & globally.
Howdy crypto-heads, it’s been a quiet few months from me but with 2024 in full swing it’s time to come out of hibernation. Also, Bitcoin has been heading up until recently and I’m sure y’all want some info on why. With lots to cover it’s going to be a great newsletter so strap in!
Bitcoin Price & ETF Thoughts
Big Changes to Crypto Taxes for US
First In-person Event for 2024
Denver Crypto Club wrap up
1. Bitcoin’s 2023 Rise and 2024 Fall
As 2023 came to a close the hype and positive sentiment towards Bitcoin (and crypto in general) felt very high, at least for people based in N. America like myself. At this time the price of BTC was still trending up from a low in November of 2022 and the approval of a spot Bitcoin ETF seemed imminent.
So what happened in the first two weeks of January? Well, the price went all the way up to $49k on the back of an approval of the spot ETF’s for Bitcoin but then it crashed all the way down to just under $42k and has since gone below $40k where it’s hovering currently.
The crypto twitter folks seemed to think it was all Barry Silbert’s fault as his Grayscale #GBTC financial product narrowly avoided going under and Barry/his customers only way out is selling the massive number of Bitcoin they own. While Barry has certainly been quite busy with his sells, in my opinion it seems unlikely that a single US entity could really drive the price down as much as we’ve seen in the last few weeks.
What I believe is happening is a confluence of technical and fundamental indicators that have many traders taking profit and selling their Bitcoin. On the technical side, if you longed Bitcoin from the low in November ‘22 you would’ve been up a massive 215% right as we entered 2024.
But even if you missed that low from 2022, the extended sideways action between April and September of ‘23 offered a nice entry and within 3 short months of opening a long the best traders would be up by 95%!
Using the wisdom of fundamental analysis and the “Sell the News” event caused by Bitcoin spot ETF approvals, I believe that many traders who are long Bitcoin are taking profits right now because it just makes sense.
While the long-term effects of the spot Bitcoin ETF’s are hard to predict (I’ve seen many mixed opinions) I think currently we are in a short-term downtrend and I expect Bitcoin to recover and likely rally leading into the miner’s reward halving this spring.
If it does retrace hard in the next month or so though (IMO 30% chance of this occurring) I’ll be watching ~$34k and ~$30k as support levels for a reversal. If we climb higher - resistance levels at $50k, $58k and the ATH of $69k will likely be stopping points. I have a good feeling about crypto for 2024 so let’s hope we’re in for a great year!
2. Big Change for US Crypto Taxes
I hope that everyone reading this has already been complying with the law for KYC’ing (Knowing Your Customer) by collecting identifying information on anyone sending you more than $10,000 worth of crypto. If you haven’t you should immediately call the most expensive lawyer you can find because in the eyes of the gub’mint you’re already a criminal.
How is this so you may ask? Well, due to you breaking Section 6050I of the new federal law that went into effect January 1st, 2024 of course. This law adds an additional requirement for digital assets when reporting cash business transactions to the IRS (which is already required on form 8300 for regular USD cash).
This same law caused so much confusion (probably due to everyone believing that first paragraph above might come true) that on January 16th the IRS and Treasury Dept. issued a joint statement clarifying a few things:
The Infrastructure Investment and Jobs Act revised the rules that require taxpayers that are engaged in a trade or business to report receiving cash of more than $10,000 by considering digital assets to be cash.
Treasury and the IRS intend to issue proposed regulations to provide additional information and procedures for reporting the receipt of digital assets, giving the public an opportunity to comment both in writing and, if requested, at a public hearing.
Basically the IRS is saying, “We could enforce this but we won’t for now cause if you take it to court we’ll lose.” In the near future however, crypto transactions will be treated the same as receiving cash in the eyes of the IRS so it’s best to begin preparing for compliance (flexing those ankles and relaxing the lower back helps tons!)
As an agency known for retroactive justice it probably wouldn’t hurt to begin tracking the people behind your transactions now, especially since the law technically says that January 1st, 2024 is the official start date.
Even though the latest statement claims to pause enforcement for an undefined period of time anywhere from months to years, the IRS has recently grown it’s enforcement budget and is looking into cryptocurrency users due to a large number of them previously playing a bit “fast and loose” when it came to reporting capital gains from crypto. Ultimately you’ll have to decide what compliance regimen is best for you, so just stay safe out there!
3. What’s happening with Solana?
With crypto prices up across the board a notable winner is definitely Solana and the ecosystem growing around it. With a price low about 1 month after FTX became insolvent in late 2022, (and Bankman-Fried became a household name) Solana has rebounded 1400% from December ‘22 to January ‘24.
While judging the true value of a crypto (or any) project solely by how much it’s profiting investors isn’t a good idea, some of this explosive growth is being fueled by two exciting sub-projects of the foundation behind Solana:
Solana mobile dApp store
DePIN and Helium
The new Solana smartphone comes with an encrypted partition for securely storing private keys and offers access to web3 dApps via it’s own store. With the first round of physical devices already sold out and next round coming soon, many web3 dApp projects are competing for inclusion on the Solana maintained mobile store.
DePIN (Decentralized Physical Infrastructure Networks) is just a fancy word for networks of users who link their hardware together for some mutually beneficial purpose. In the case of Solana backed project Helium, their aim is to make a new grid of cellular and data coverage, and anyone who buys their hardware and keeps their device online earns the $HNT token.
If you’ve attended past meetups of mine you may have heard my critical comments on Solana, particularly the bug that halts the blockchain in times of high congestion. Additionally, the level of decentralization compared to other popular Layer 1 blockchain’s is low which is also concerning.
While no project is perfect, with the recent attention due to Solana’s price and DCG members asking for a fresh review of the project I’d like to invite the Denver Crypto Group community to an evening presentation about Solana (and to catch up since it’s been awhile!)
Tuesday, February 6th at 6:45pm (In-person only, no zoom)
Eloise May Library, 1471 S Parker Rd, Denver, CO 80231
4. Denver Crypto Club recap
I can’t believe it’s been two years since the DCC began! For those of you who did not know about our investing club, we started in March of 2022 and recently liquidated all of the monthly cryptocurrency purchases we had been making for nearly 2 years.
Started while Bitcoin was on the way down from it’s ATH, our first club purchase happened with BTC worth $38,647. Eventually it bottomed after going below $16k and by the time we sold it was back over $40k this December.
While Bitcoin appreciated slightly during the 21 months of operation, our monthly club meetings picked some great winners like Solana and lending protocol blue chips $AAVE and $COMP at a nice discount. By the end our crowdsourced club’s investments appreciated 13.33% over the same period that Bitcoin appreciated only 3.5%.
While the club was a lot of fun, Rose and I were not getting paid to maintain the accounting and tax information, organize meetings, prepare presentations, make crypto purchases and securely self-custody the clubs funds. At this time I do not have plans to revive the club but I’m open to it if enough people are interested.
That’s it for this edition, stay happy and healthy and I’ll catch you soon!
Much Love,
~Matt