We think – cryptocurrency, we say – bitcoin. It is no coincidence that it is the first and most widespread instrument of this type today. It became a model for many imitators and modifiers and became the driving force behind the development of blockchain technology, which today has a much wider application than just cryptocurrencies.
There is one king, but…
Bitcoin was created in early 2009 by a mysterious person (or maybe a group of people or an organization) hiding under the pseudonym Satoshi Nakamoto. If you take capitalization into account, today it is the cryptocurrency with the largest market share. Its importance is also measured by the increase in value – when Bitcoin was created, it cost several dozen cents, today its valuation exceeds 60,000. hole.
Bitcoin found many imitators relatively quickly. This trend was fueled by a decline in trust in traditional financial instruments, institutions supervising markets and even in governments, which was the result of subsequent crises that had shaken the market since 2008.
One of the Bitcoin enthusiasts was Vitalik Buterin – a Canadian of Russian origin – who decided to improve Nakamoto’s invention. In 2013, he started working on the Ethereum project. The original goal was to update the Bitcoin protocol to allow it to perform more complex tasks than just “simple” value exchange transactions. Ethereum, like bitcoin, is a decentralized and open-source platform, but it has much broader applications. Using it, you can create tokens and build decentralized applications. The utility value is the reason for the great popularity of this project. Another popular altcoin is based on the Ethereum network – Binance (BNB), associated with the largest cryptocurrency exchange Binance.
Another popular cryptocurrency is XRP, often called ripple after the name of the company that developed a real-time settlement system. It has been adapted to the capabilities of blockchain technology. It is a quasi-decentralized platform. It connects financial institutions, allowing them to transfer funds instantly.
Popular cryptocurrencies also include solana – a network that has gained considerable popularity with the development of NFTs. It is a blockchain that allows for fast transactions at high throughput. With SOL, users include: they pay transaction fees.
Market laws
Those interested in investing in cryptocurrencies have a very wide choice. Is it worth it? The cryptocurrency market is characterized by high volatility, but it also gives investors good profits.
What do prices depend on? As with all other investments, the bitcoin market is governed by the laws of supply and demand. When it comes to Bitcoin, the total supply is by design limited to 21 million coins to prevent inflation. An additional mechanism for protection against a decline in value is halving. It involves the fact that approximately every four years (most recently in April this year), the reward for mining bitcoins, also known as the “block reward”, is halved. So the supply is constantly decreasing.
This is something you need to know
• So far, there have been no clear regulations in Poland that would define the principles of operation of cryptocurrency companies. This will soon change because the MiCA (Markets in Crypto-Assets) regulation adopted by the Council of the European Union on June 29, 2023 will come into force and will be fully applicable in December 2024.
• The rules for settling accounts with the tax office are clear. Revenues from the paid sale of cryptocurrencies are settled in PIT-38. The tax base is income (i.e. revenue minus tax-deductible costs).
• Revenue is generated when virtual currencies are sold on the stock exchange, in a currency exchange office or on the open market, or when virtual currencies are used to pay for goods, services or property rights or to settle other liabilities. Revenues from the sale of virtual currencies are not combined with other revenues from monetary capital.
• Expenditures incurred for the purchase of equipment intended for mining virtual currency and electricity used, as well as expenses related to the conversion of virtual currency into another virtual currency, cannot be considered tax deductible costs.
• A 19% tax is paid on the income obtained from the paid sale of virtual currencies. income tax.
At the same time, demand is growing. This has been happening for a long time because investors were looking for alternative investments, but this year cryptocurrencies, primarily bitcoin, have been allowed to enter the investment mainstream. In January, the US stock exchange supervision authority (SEC) admitted to trading spot ETF funds (ETF futures were available from 2021) based on Bitcoin. This opened the way to investments in this market for players who were distrustful of cryptocurrency exchanges, which are generally not subject to any regulations. Although investors in Bitcoin ETFs do not have only cryptocurrencies in their portfolios, they can benefit from fluctuations in their rates.
How much has the SEC decision increased interest in bitcoin? In October 2023, Matthew Hougan, director of the cryptocurrency company Bitwise Investments and one of the main experts in the field of digital assets, ETFs and financial technologies, presented a forecast according to which Bitcoin ETFs were to attract $55 billion. within five years of its debut. Less than a year has passed since his statement, and the new funds are already close to achieving this result.
The power of great players
As with other assets, cryptocurrency rates are influenced by large players. Elon Musk is considered one of the great promoters of cryptocurrencies. His company, Tesla, invested $1.5 billion in cryptocurrencies, but sold 75% of it in 2022. this wallet, which caused significant fluctuations in the bitcoin price. Musk also “messed” the rates of other cryptocurrencies – his warm posts about dogecoin – a cryptocurrency that was created as a joke – also led to jumps in the value of this currency.
Cryptocurrency prices are also influenced by regulations in individual countries. In 2021, when the Chinese authorities tightened their attitude towards Bitcoin and the cryptocurrency market, the price of the virtual currency fell.
Similarly, friendly regulations may have a positive impact on the cryptocurrency exchange rate. As more and more reports appeared about El Salvador’s positive approach to cryptocurrencies, and there was more and more talk about adopting bitcoin as an official means of payment, the exchange rate rose in many South American countries.
Profits and taxes
The approach of individual countries to cryptocurrencies is very different. From a ban – as in the case of China – to the admission of bitcoin as a means of payment, which took place in El Salvador and the Central African Republic. The latter countries are not among the world’s economic leaders, so it did not become a gamechanger, but it proved that state organizations can also recognize cryptocurrencies as an official means of payment.
In most countries, until recently, cryptocurrencies escaped all regulations. Because they brought profits to investors, some governments decided to tax them. In the USA, you have to share your earnings with the tax office, and the rate depends on the duration of the investment. If it is less than a year, the tax is from 10 to 37 percent, depending on the income threshold. For long-term investments, i.e. over a year, the rate may be 0, 15 or 20 percent. depending on individual or marital income. Cryptocurrencies are not recognized as legal tender in the US, but exchange trading regulations vary from state to state.
In the UK, cryptocurrencies are considered property but not legal tender. Stock exchanges must register with the UK Financial Conduct Authority (FCA).
India is not clear about its approach to cryptocurrencies. It can be said that the authorities are hesitant whether to legalize them or tighten regulations. There is a 30 percent tax imposed on all cryptocurrency transactions.
Brazil has passed a law legalizing cryptocurrencies as a payment method throughout the country. This does not make them legal tender. Investors pay taxes on profits above PLN 35,000. Brazilian reals (BRL). If it is less than BRL 5 million, you pay 15 percent, above BRL 30 million – 22.5 percent.
Japan has a liberal approach to cryptocurrencies. For tax purposes, profits are treated as “miscellaneous income” if the income from cryptocurrencies did not exceed PLN 200,000 in a given tax year. yen. Above this amount, the tax rate may range from 5 to as much as 45 percent. Cryptocurrency exchanges must register with the Financial Services Agency (FSA) and follow certain procedures. In 2020, the Virtual Currency Exchange Association (JVCEA) was established. All Japanese stock exchanges are members.
Cryptocurrencies on Wall Street
Sławek Zawadzki, one of the founders of the Kanga brand / Press materials
The appearance of Bitcoin-linked ETFs in the US is nothing more than the entry of the most important cryptocurrency on Wall Street. This step opened a previously closed path to investing in Bitcoin for investment funds with huge capital. Until now, this was impossible due to internal regulations, statutes and laws that prevented funds from purchasing virtual currencies.
Thanks to the emergence of ETFs, institutional investors can begin their adventure with exposure to cryptocurrencies without having to make changes to their internal regulations. From a formal perspective, an ETF unit (fully backed by bitcoin) remains a security, not bitcoin itself.
ETFs attracted not only big fish. Private investors who have no experience investing in cryptocurrencies can now trade them in an environment they are familiar with.
At the same time, we must remember that cryptocurrency enthusiasts, i.e. people who have been trading them for years, are not interested in buying ETF units related to bitcoin. They prefer bitcoin directly on their wallets. This means that mainly “new blood”, i.e. new capital, appears among investors in ETFs.
Share in cryptocurrency market capitalization / Dziennik Gazeta Prawna – digital edition
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kanga Logo / photo: press materials