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Predicting the Tax narrative

So I like to try and predict what the narrative around something would be in the future. With the tax story here is what I see that after the initial shock has subsided whales will stop shooting themselves in the foot. What are they going to do, withdraw out of all appreciating assets and keep it all in a deflating fiat ? The solution to higher capital gains , is to try to make more money not stop making money.

Also one article I read said:

“Indeed, there is “no relationship between capital-gains taxes and market returns,” writes David Lefkowitz, head of Americas equities at UBS. In 2013, for example, the S&P 500 gained 30% even though the capital-gains tax rate rose nine percentage points. In 1981, the tax rate fell about eight percentage points, but the S&P 500 still fell 10%.

The reality is that earnings growth and interest rates are the most important factors affecting stocks, which makes assessing the impact of tax rate changes on stocks difficult”
(https://www.barrons.com/articles/a-higher-capital-gains-tax-usually-doesnt-affect-stocks-51616936400)

So after the initial shock dies down, I predict people will be looking to get better returns for their investments to offset the larger chunk of it disappearing. And at that point, money will be flooding into bitcoin as a safe store of value that also appreciates greatly.



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7 Comments

  1. I believe it’s more of the retail investors getting scared and pulling out as well.
    There’s no way whales don’t invest in the market, be it stocks or crypto, just because of this tax news( which I feel it’s unlikely to even pass) . The gains they make is too huge to just let go for them.

  2. Not only that, but when newcomers find out about the actual purpose of DeFi, and how it would actually save them taxes compared to other traditional investment strategies, it will definitely appreciate greatly

  3. It’s possible that whales are just securing their gains with current tax rates, then if the new tax rate does happen, the whales will probably reinvest their gains from the “old” tax rate into crypto. Therefore, netting more money because profit is profit.

  4. The other thing I’d like to add is that a lot these whales benefited from the government injecting massive amounts of cash into the system. The government made it rain money, so it’s only natural they want to now take more of it from our arms.

    I’m no economist but could we we be seeing the start of hyperinflation here? (Perhaps an actual economist would care to comment?).

    And if so , wouldn’t bitcoin be the ideal store of value?

  5. I never understood how the US taxing high income (>1million) would tank crypto…

    Crypto is a global market, and I suspect most people earning that much have a way of ‘avoiding’ those anyways.

  6. I think it’s a red herring.

    Assuming that like Canada, an ETF in the US can be held in a tax sheltered account. If my assumption is correct then any capital gains tax becomes a moot point once the US approves it.

    Call me a conspiracy theorist…but this narrative bodes well for old institutional money to welcome (with open arms) the in flow of the remaining 99% investment dollars when ETF’s are finally approved in the US because…and instead of buying coin they’ll be buying shares of coin. (Which is a win win because the money stays in the US, controlled by a firm which is controlled by the Treasury. If you can’t beat them, at least keep their dollars.)

    Nevertheless this will be a good thing because prices for BTC are conveniently low considering the US is on the precipice of launching an ETF (which will at least tenfold Canada’s $1B market cap fund) and will once again drive up the prices as predicted.

    Oh and don’t forget that Coinbase has to at least produce two more “better than the last” earnings reports to meet their own expectations when it comes to overall valuation. We know the June report will eat the last because…it was during the boom of the boom period and look at all the current activity happening and all the complaints over the higher than usual fees? (Which is COIN’s bread and butter).

    Just throwing it all out there.

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