Ark Invest founder and CEO Katy Wood warns investors not to sell or trade in Bitcoin (BTC) before the IRS introduces smarter taxation policies on digital assets.
In a webcast hosted by Cboe, Wood said handling BTC could lead to huge tax liabilities.
“The IRS has a lot to say about this, so if you have huge profits from bitcoins, I don’t think I’m going to tolerate a lot of transactions until we get some tax changes,” Wood said. To Markets Insider.
Using bitcoins in transactions and selling them for profit has become attractive options for long-term contract holders. The main cryptocurrency recently climbed over $ 61,000 on its way to a full-time high. And although the price of BTC has changed dramatically from the recent peak, it is still up 80% during the year.
Bitcoin holders in the United States can now use Bitcoin to buy Tesla cars. At current prices, the Tesla Model 3 base can be purchased for approximately 0.72 BTC.
But whether you sell Bitcoin at a profit or use it to buy Tesla, it’s a taxable event – at least in the United States. This is because the IRS views bitcoin as real estate and not as a currency. Until that changes, cryptocurrency trading can be counter-intuitive.
While Wood’s comments were specifically aimed at people who made huge profits, the vast majority of buyers made money with their bitcoins. In November 2020, it was estimated that about 98% of the BTC addresses were black.
Fortunately, bitcoin investors who make big and unrealized profits do not have to sell their coins to be rewarded for their income. Platforms like BlockFi allow users to borrow paper money for their BTC assets and pay off over time. This means that users never get a win and do not have to give up bitcoins to access cash.