Riding The Wave News Summary #38
With an 'Aggressive' Fed Rate Hike Expected Next Week, Stocks and Crypto Markets Lose Billions, Two Senators details new crypto legislation to create tax exemption for capital gains, & more
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Table of Contents
Tweets
With an 'Aggressive' Fed Rate Hike Expected Next Week, Stocks and Crypto Markets Lose Billions
Two Senators details new crypto legislation to create tax exemption for capital gains
Bitcoin network difficulty breaks into a new all-time high of 29.794T
Bitcoin halving analysis hints at $24K bottom before the end of 2022
Warren Buffett gives his most expansive explanation for why he doesn’t believe in bitcoin
Honorable Mentions: Leading NFT Marketplace OpenSea Now Accepting ApeCoin, Please Don’t Buy a 'KYC’d' Wallet for the Bored Apes Team’s Otherside Mint, & Warning: Smartphone text prediction guesses crypto hodler’s seed phrase
Tweets
With an 'Aggressive' Fed Rate Hike Expected Next Week, Stocks and Crypto Markets Lose Billions
A number of financial institutions, analysts, and economists expect the Federal Open Market Committee (FOMC) will raise interest rates next week in an aggressive manner.
“U.S. Federal Reserve policymakers look set to deliver a series of aggressive interest rate hikes at least until the summer to deal with hot inflation and surging labor costs, even as two reports Friday showed tentative signs both may be cresting,” the report explains.
In addition to the Reuters report, the Dutch multinational banking and financial services corporation ING Group believes a big hike will come this Wednesday. In the report, ING expects the FOMC and Fed Chair Jerome Powell to announce a 50 basis point rise. ING’s report says that “inflation worries outweigh temporary GDP dip.”
The CEO and founder of eightglobal.com Michaël van de Poppe tweeted about the fear in crypto markets on Saturday. “The amount of fear in the markets currently due to the upcoming FED meeting is comparable to the bear market vibes in 2018,” the Eightglobal founder said. “That tells a lot for the markets and Bitcoin.”
“The day trading fervour symptomatic of lockdown – which saw so-called meme stocks pump to unearthly valuations – already seems like a thing of the past,” the analysts added. “Robinhood has cut staff amid a drop in revenues as a bearish sentiment takes hold in the stock market. Still, it is interesting to note that the percentage of the bitcoin supply dormant for a year or more made new all-time highs this month, according to data from on-chain analytics firm Glassnode.”
All of the pressure around rate hikes in the macro-economic environment is definitely putting pressure on Bitcoin. The good news is that often the rumors of hikes puts more pressure than the actual event happening so should there be hikes in the amount estimated it will likely have less of an impact than what the rumors had.
Two Senators details new crypto legislation to create tax exemption for capital gains
Senators Cynthia Lummis (R, WY) and Kirsten Gillibrand (D, NY) are proposing a tax exemption for up to a certain level of capital gains on cryptocurrencies, as part of new forthcoming legislation to regulate cryptocurrencies.
“We came up with a number of $600 just start out with, but among the things that we're doing is sharing our bill draft with a number of our constituents so we can get feedback,” Lummis said in an interview with Yahoo Finance. “Is $600 the right number? Should it be higher considering inflation, and in other factors?”
Unlike traditional classes, like stocks and bonds, both senators believe crypto should be allotted a capital gains tax pass up to a certain amount allowing ease of use.
“This is not like owning a stock because you're not using your stock portfolio to play a computer game online,” said Gillibrand. “Imagine a kid owning some cryptocurrency in a game, and if he has $40 worth of cryptocurrency, you need to have a de minimis amount so that kid’s not filing taxes.”
Senator Lummis says most cryptocurrencies are commodities, which would put them under the jurisdiction of the Commodity Futures Trading Commission for trading spot markets and futures markets. She says for crypto products that are bundled into securities, they would have the so-called Howey Test, a case law test that helps determine what's a security, which would fall under the Securities and Exchange Commission.
When it comes to stablecoins, the senators feel the Office of the Comptroller of the Currency would be the best regulatory agency to oversee them. While the OCC is one of the nation’s major regulators of banks, the senators don’t want to regulate stablecoins as if they are banks. They also don’t want to limit stablecoins to only being banks.
“They don't do the same things as banks, and they're not intended to be banks,” says Gillibrand. “We don't want to create so much cumbersome infrastructure around it because it's not necessary since the uses are very different. So we're going to look at the stablecoin industry a little more holistically.”
Senator Lummis points out a great example of how the current approach to taxes will be extremely hard to apply to crypto as they are currencies but many just use the there underlying currency to enable a service or product on their project. The solution I would lean towards would be funds taxed when entering or exiting a chain but not charged when on-chain although I doubt this would happen (the government wants all funds on any “transactions“).
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