Crypto price check: Bitcoin slightly higher as market share shrinks
You know things are bad when Jimmy Fallon mocks you.
During his Sept. 7 monologue, the “Tonight Show” host poked fun at the recent slide in cryptocurrency prices with a fake ad for a product called “Crypto-Bismol,” a nod to the upset stomach drug Pepto-Bismol. (PG)
“Suffering from heartburn, nausea and an upset stomach, all because you lost your savings on crypto?” asks the false advertisement.
Crypto-Bismol will “relieve your anxiety after you wasted your kids’ college funds on a JPEG of a zebra with a Mohawk and braces,” the ad says.
Fallon, by the way, was on board with the whole Bored Ape Yacht Club trend earlier this year.
Bitcoin was up nearly 1% to $19,253 at last check, according to data firm CoinGecko. Ether, the native currency of the ethereum blockchain, rose 1.7% to $1,637.63. Dogecoin rose 1.4% to $0.060785.
The crypto market capitalization fell below $1 trillion to $983 billion, a level not seen since June. Last November, the crypto market hit a record high of $3 trillion.
Losing market share
“As bitcoin, the largest cryptocurrency, struggled with the $20,000 level over the long weekend, it is also notable that BTC is also losing market share among all cryptos,” said Winston Ma, managing partner of CloudTree Ventures.
Ma, author of “Blockchain and Web3: Building the Cryptocurrency, Privacy, and Security Foundations of the Metaverse,” said bitcoin’s share of the total cryptocurrency market capitalization, currently below 40%, is at its lowest in as much as four years .
CoinMarketCap data puts bitcoin dominance at around 39%, the lowest since June 2018, he said.
“BTC’s smaller share of the total crypto market today reflects the variety of many tokens that have emerged in recent years,” Ma said. “It may also be related to the rise of ETH driven by the upcoming ‘merger’ planned for mid-September.”
Ethereum’s update is meant to reduce its carbon footprint while reducing its ether supply. According to the ethereum website, the merger will reduce energy consumption by around 99.9%.
Double digit rallies
The plan is to move from a proof-of-work to a proof-of-stake model.
Proof-of-stake means that miners no longer have to spend the energy to prove that they have capital at risk, which they do now in the proof-of-work model.
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Since its inception in 2009, bitcoin has operated on a proof-of-work model.
“The merge continues to capture everyone’s attention, with the successful Bellatrix upgrade paving the way for the merge to go live between September 14-16,” said James Edwards, crypto specialist at Finder.
Edwards said traders looking for ways to trade the merger have started looking at proof-of-work mining coins like ethereum classic, ravencoin and flux, “all of which showed double-digit rallies this week while the rest of the market was dozing off.” “
“The idea is that ethereum miners – who will become obsolete after the merger – will direct their hardware to mine these coins instead,” he said.
“The rally may have been fueled by mining outfit Hive Blockchain announcing it would explore options [proof-of-work] coins for mine.”
Traders beware
Edwards said this thesis is a bit thin, “as there is no compelling reason that increased mining activity will lead to increased prices in the long run.”
“Additionally, ethereum mining rigs are optimized for the ETHash mining algorithm, which is not used by any of the coins that have clustered, other than ethereum classic,” he said. “Traders should be careful about jumping on the bandwagon events like this.”
On the legal front, David Lesperance, managing partner of immigration and tax consultancy Lesperance & Associates, warned that if crypto-enthusiasts don’t understand tax laws, this could quickly wipe out any financial gains and could even lead to criminal charges.
Lesperance noted that bitcoin evangelist Michael Saylor and his company MicroStrategy (MSTR) is being sued by District of Columbia Attorney General Karl Racine for alleged income tax evasion.
“While he may have been operating mentally in the cryptosphere, the IRS has been watching his activities in the physical world,” Lesperance said. “Specifically, they looked at his claim that he had changed his tax domicile from high-tax Washington DC to zero-state Florida and found it highly questionable.”
DIY Tax Planning: A Warning
Saylor’s problems are not unique, he said, as many cryptos have moved to Puerto Rico in recent years to take advantage of US tax savings. This jurisdiction’s Act 60, Tax Incentive Code, provides tax exemptions to businesses and investors that move to, or are established in, Puerto Rico.
“Unfortunately, one of the requirements to obtain these tax benefits is that the individual spend at least half the year physically in Puerto Rico itself,” Lesperance said.
“Those who have treated this requirement as a suggestion rather than an absolute necessity are in for a rude awakening, as the IRS has set up a special task force to audit all Act 60 recipients to ensure compliance.”
He warned that crypto-enthusiasts “trying to engage in DIY tax planning by moving to Puerto Rico; obtaining second passports in the Caribbean; buying NFTs on Satoshi Island or seeking residency or citizenship in El Salvador are stepping on tax landmines everywhere .”
“Along with not understanding the compliance requirements for Puerto Rico,” he said, “most people don’t understand that the simple purchase of another citizenship by itself does nothing to change their U.S. tax liability.”
