While Bitcoin dominates headlines and investor sentiment, IaaS platforms like Ethereum are what will create Internet 3.0.
Friday, Bitcoin pushed through its previous high near $5000 like there was no resistance. The digital currency spent a couple of days pushing up against that limit until a number of minor news items brought in a massive wave of buyers.
What was interesting was watching most of the rest of the crypto-market not respond alongside Bitcoin. Unlike in rallies past where Bitcoin’s success was a rising tide lifting all boats, yesterday saw continued selling in a many coins/tokens with bright futures.
In effect, we saw liquidity drain out of coins like NEO, Waves, Monero and STEEM and back into the big three, Bitcoin, Litecoin and Ethereum. This makes the argument pretty clear that some of these coins were way ahead of themselves.
They were the recipient of profit-taking out of the big three. Most of the money that moves into the crypto-space isn’t coming back out again because of uncertainty surrounding taxes. This is part of the reason why the ICO – Initial Coin Offering – market exploded this year.
All of these profits can’t be brought back to the ‘real world’ lest these newly-minted ‘Crypto-Millionaires’ get rapped with massive capital gains taxes, especially here in the U.S.
The I.R.S. classifies Bitcoin as ‘property’ and hence is taxed at the capital gains rate. If your cost basis is next to nothing, pulling that money out for any purchase bigger than your mortgage or car payment makes little sense if you think the correction in Bitcoin is a temporary one.
Hence, using that new capital to fund new projects as a form of tax shelter makes sense. So does booking profits in the ‘under-valued’ coins. And it doesn’t take a lot of this rotation to send some of these coins up by factors of five or ten.
But, once Bitcoin cleared the next technical hurdle those profits can then be rolled back out of these ‘alt-coins’ and back into Bitcoin to chase the momentum.
Read the rest over at Seeking Alpha
The latest issue of the Gold Goats ‘n Guns Newsletter has specific information on how to profit from the coming Gold and Crypto Bull Market.