Cathie Wood, founder and CEO of Ark Invest, warns investors not to sell or trade their bitcoins (BTC) until the U.S. Internal Revenue Service, or IRS, implements a more reasonable tax policy for digital assets.
In a Cboe webcast, Wood said the BTC transactions could lead to significant tax liabilities.
The IRS has a lot to say about this, so if you have a big profit in your bitcoin, I don’t think I’m going to have much patience in the way of transactions until maybe we get some changes on the tax front, Wood said, according to Markets Insider.
Using Bitcoin for transactions and selling it at a profit have become attractive options for long-term holders. The flagship cryptocurrency recently surpassed $61,000 and is on its way to new all-time highs. And although the price of BTC has corrected sharply from its recent peak, it is still up 80% from last year.
Bitcoin owners in the United States can now use their BTC to buy Tesla vehicles. At current values, a base model of the Tesla 3 can be purchased for about 0.72 BTC.
But whether you sell bitcoins for a profit or use them to buy a Tesla car, they are considered a taxable event, at least in the United States. That’s because the IRS treats bitcoin as property, not currency. Until that changes, trading with cryptocurrencies can be intuitive.
Although Woods’ comments are specifically aimed at those who have amassed huge profits, the vast majority of buyers have earned their bitcoin. It is estimated that about 98% of BTC addresses were black by November 2020.
Fortunately, bitcoin investors who are posting large unrealized gains don’t have to sell their coins to profit. Platforms like BlockFi let users borrow fiat money against their BTC holdings and pay it back over time. This means that users never receive any capital gains and do not have to surrender bitcoins to get money.
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