Barely Any Cryptocurrency Traders Have Paid Their Taxes
2017 was an earth shattering year for cryptocurrencies as the total market appreciated by 3,300%. However, a new survey suggests the vast majority of U.S. traders haven’t reported their gains. In fact, the number of traders who have reported their crypto-related capital gains to the IRS is less than 100.
Nothing for Uncle Sam
Credit monitoring company Credit Karma has released a report showing that, of the first 250,000 tax filings it received, less than 100 filers reported owning digital currency. Cutting through the FUD, it’s not entirely clear whether this number refers to 250,000 cryptocurrency traders or simply 250,000 American tax filers.
Given the extent of last year’s price rally, there should be more Americans reporting a hefty increase in their capital gains. Various news sources have reported that nearly 57% of respondents in a recent Qualtrics survey said they made money from crypto investments. The survey’s sample size was 2,000.
Cryptocurrency investments that result in profit are considered a form of capital gains by the Internal Revenue Service.
Americans have until Apr. 17 to file their taxes. The IRS expects 156 million individuals will file returns this year.
Although Credit Karma said it expects more people to report crypto-related earnings later in the tax season, nobody was counting on so few numbers. While gains were relatively easy to come by for “hodlers” – traders in it for the long haul – speculators may have had a more difficult time converting deposits into profits due to the market’s heavy volatility.
If we use bitcoin as a proxy, it’s easy to see that the market’s value is highly concentrated in a few hands. In the case of bitcoin, about 1,000 people own 40% of the supply.
One way to alleviate market concentration is to democratize cryptocurrency as an investment. The introduction of bitcoin futures last year was seen as a watershed moment for wide scale adoption, at least in the institutional sense. Several fund managers have also been pushing for bitcoin ETFs, but have so far been unable to overcome the SEC’s scrutiny.
The cryptocurrency market has been in a funk as of late, but finally appears to be showing signs of recovery. At the time of writing, a single bitcoin was worth nearly $9,500, the most since Feb. 1. The total value of all cryptocurrencies was $460.4 billion, according to latest data.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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