Bitcoin: here to stay
once they tax something they never kill it
As someone who has been buying Bitcoin every week for about ten years
and working in The Financial Services sector (a retired Investment Banker, I now sell Financial Markets research and associated services to several banks) I’m often challenged about my focus on Bitcoin, and suggestions that everyone should own some. First of all, while I am a Bitcoin maxi in many ways
I don’t hold all my wealth in Bitcoin, and own a broad portfolio of other assets; stocks, bonds, bullion, rental property, art, as well as various assets generating royalties. However, to those who hold 100% of their wealth in Bitcoin, maximum respect! You guys are awesome. And second of all, I’ve long believed in this crypto currency, which is, of course, why I invested in it for so long, going back when it was a very, very high risk asset to own.
Even now I’m frequently told by people who should know better that Bitcoin is risky, that Satoshi would easily expand the maximum supply above 21M coins, that anyone can steal my Bitcoin, the list of falsehoods and misconceptions and just downright loser think is pretty long. However
ONE ARGUMENT WAS ALWAYS INDISPUTABLE
that The US could somehow kill Bitcoin, at least for Americans, simply by making private and direct ownership illegal. From the history of finance (my favourite quiz show category) we see there is legal precedent for this: America’s seizure of all citizen’s gold in 1933
A nation struggling to emerge from The Great Depression and a historic stock market crash, blindsided by an enormous banking crisis in 1933, took the step of outlawing private ownership of gold. Citizens were required to surrender their bullion to the Government, who generously paid $20.67 a troy ounce (oh you gotta love avoirdupois!) for the metal, far below market value at the time. Once The Government had effectively confiscated all gold held by private citizens, they set the market price of gold at $35 a troy ounce. A profitable trade if there ever was one. So
THIS ARGUMENT HELD FOR MANY YEARS
what if The US Government confiscated all Bitcoin? Sure, it may have been possible for any coins found on exchanges, however self-custody of digital assets isn’t the same as ownership of physical assets such as gold. So I was never convinced by that argument and kept stacking sats. However in
FINANCE THINGS CHANGE AND SOMETIMES FAST
so now — with just a stroke of the pen, mind you — Mr Biden has endorsed Bitcoin and we can confidently say, it is unlikely The Feds will every kill it — why? Simply because Mr Biden’s 2025 budget is taxing it as a source of income. Sell Bitcoin, you will pay taxes. Mining Bitcoin? You will pay taxes. Soon to come, taxes on income generated by lending Bitcoin. And, once the structures are in place — I mentioned in this article I’m aware of several Financial Institutions who are addressing this problem
The Feds will be taxing that source of Bitcoin driven income as well. And nobody really knows what Financial Engineering (which is my field) in the future holds for Bitcoin, the first truly revolutionary asset we’ve see emerge in perhaps a century or more. Everything else has been more of the same, typically derivatives in some way, shape for form.
But once they tax Bitcoin and generate revenue that money will be allocated to a programme, and they WILL NOT kill the goose that lays the golden egg. ESPECIALLY WHEN America is in dire financial straights, with both budget deficit as well as national debt at historic levels. Because
TO DO SO, TO KILL BITCOIN
would be to expand one, or perhaps both. The only thing that will happen is nominal tax rates will rise or fall, pretty much normal for those of us who focus on taxes from fiscal year to fiscal year, from administration to administration (sidenote: and typically pay very, very low rates of tax, but I deserve it as I work on my taxes for about 30M every month, and you should too, don’t let them take your money easily, learn the tax code). But those taxes will most assuredly not be cut to zero. To do so would be political suicide, simply because — and you have to fully understand American politics to see this before the fact as I do — they will link tax cash flow to some high profile, program that will appeal to one of more segments of the public — The Children, The Animals, The Environment — and by doing so will grant it immortality. If you
DOUBT ME ON THIS LOOK NO FURTHER
doubt me on this look no further than tobacco in The United States and other nations. It’s been proven for decades that smoking kills. To date while there is no government that has totally outlawed smoking
many nations are progressing to that goal. The most ambitious hopes to be totally tobacco free by 2040. But many nations, The US included are dragging their heels — why? As addictive as tobacco is, tax revenue is far, far more addictive. You can
REVIEW MR BIDEN’S ENTIRE BUDGET
and proposed taxes
and start to plan, as I am already doing. But we no longer have to worry about The Fed’s killing off Bitcoin. Now, more than ever, I can confidently say we will always have Bitcoin. Simply because