Topic: 'Bitcoin is Inflation-hedge' - 'Haha, we just Tax you, that's the same' (Read 349 times)

From how I see things, Bitcoin will surpass $100,000 in less than a year from now; however, even though some economists claim that Bitcoin is a hedge fund against inflation, I somewhat disagree. On the one hand, it has shown that statistically, it has a much higher APY than any other investment; on the other hand, it varies from time to time and may not show any growth for extended periods of time. Banks hardly offer anything anymore; 1% would be considered decent, as most banks offer way less than that. Some investment groups and platforms, though, may offer up to 4% to 6%.

The OP describes taxation as a form of inflation; although this isn't accurate, it has a grain of truth in it. I'm not sure if this is also happening in other European countries; I believe it is, but "green tax" has been imposed on several one-use plastic products, increasing the final cost to the consumer. Isn't that a form of tax-made inflation?

Hidden tax would be is when a thing is sold at over price. I think governments is also the ones who caused an inflation and they might do something shady, so it is the same as them collecting taxes on the people but it is just that for a non-corrupt government taxes can still go on a better place. All people oriented governments don't like the inflation, so they are doing their best to keep at the recommended level. If not, they might lend out some help. So the people's confidence towards some governments are still in good level.

Not only them but all are like that and even without inflation, evaluating risk is always important. BTC is great but there are other options too if we want.

Tax is there. Inflation is there. Those are given. Those are the constant in the equation. So, they aren't the issue. You cannot make them go away anyway. The concern is which asset to keep, which commodity to invest in, that would somehow cushion the effects or impacts of inflation and taxes to your financial well-being.

There are options, of course. There's real estate. There's gold. There's stocks and bonds and whatnot. And then there's also Bitcoin. As far as price appreciation is concerned, however, Bitcoin is the best performer.

The explanation you provided highlights that inflation acts like a hidden tax for citizens, even though it’s not the same as a formal tax. Essentially, taxes are funds collected by the government, while inflation decreases the purchasing power of our money. This means that goods and services become more expensive, while most people's salaries likely remain the same.

Governments don’t like this situation, even if the officials are not diretctly affected since they are earning big salaries. But this is not good for the country as the overall effect is negative, it can lead to people's loss of confidence in the government, and the country’s borrowing costs can increase. Inflation rates are always a key factor that lenders consider when evaluating risk. So it's always better to have bitcoin as a hedge so we won't struggle a lot when this time will come.

Governments and policy-makers are on top of their nations, they belong to elite class and are less affected by inflation while the lower classes in same countries have to struggle more with inflation and their life quality decreases a lot with higher inflation. It's right that inflation affects all areas, all aspects of life and it's only matter of time for people realizing it.

If in a country with Illegal status for Bitcoin, and I am living there, I will try to be as most careful as possible with any activity with my Bitcoin and Bitcoin transactions. Big problems can appear any time and I am not ready to face with legal issues carry out by government against me.

Inflation is sometimes called the hidden tax, but they're not the same thing. The state might also suffer from inflation, it's usually not benefiting from it. Taxes, on the other hand, go directly to the state authorities and are, in theory, used for something that important for all citizens.
As for how Bitcoin is taxed and whether inflation is cheaper or not, that depends on a specific country, with its inflation rate and taxes.

Anything get taxed by government, but as long as the return is bigger than the inflation rate + taxes, Bitcoin already hedge against inflation. Why you need to afraid with tax when other stable assets also get taxed and the return isn't bigger than Bitcoin, in this case Bitcoin perform better.

If you live in a country where it's not illegal to use Bitcoin as a currency, you will not pay capital gains tax when you bought something using Bitcoin, but you do need to pay personal income tax.

Holding privacy coins seems not worthy since the return is uncertain.

There are many ways to Earn bitcoins, but it is like work to earn bitcoin, and it's very different than Play to Earn and Others to Earn tokens that are useless.

How to earn and make money with Bitcoin?
Cryptocurrency job list.
[General] How to earn Bitcoins

Some people can think of earning bitcoin by staking it but they did not know of some big risks:
Bitcoin is Proof of Work, not Proof of Stake.
So if they want to stake bitcoin, they can not do it directly with bitcoin on Bitcoin blockchain, and will have to convert real bitcoin to Wrapped Bitcoin tokens. They are tokens, kind of altcoins on some altcoin blockchains, not real bitcoin.

It's first risk, risk of token depeg to Bitcoin price.

Another risk is staking pools are scam, exchanges with these pools are scam. They will lose money by staking on scam platforms and pools.

If they have bitcoins, my advice is only holding their bitcoins.

Listen I hear you, it is shit. Any investment is subject to tax. Which is a shame because you as the individual take the risk, not the government. Some countries do have tax offsets for crypto though. So if you lose on cryptocurrency and claim it has a capital loss, in future years if you make a gain you can claim the capital loss as an offset against your capital gain.

For me, I hold cryptocurrency as an allocation of my total networth with no plans to sell it, only if I am on retirement.

It seems the recent talk of taxing Bitcoin, along with statements from the ECB and the US Fed, stems from the irony of Bitcoin’s journey as a high-risk, low-reward asset that was initially overlooked by high-net-worth individuals and institutions. Typically, these entities have a significant advantage: they invest in opportunities before IPOs, influence rules and regulations, and control the flow of fiat currency. But Bitcoin offered no such early advantage. For institutions like BlackRock, an early investment of substantial capital would have been almost impractical. Imagine, for instance, if BlackRock had tried to put $500 billion into Bitcoin when it was valued at $100 per coin—it would have risked distorting the market entirely, with considerable risk and little immediate reward.

Instead, Bitcoin’s early growth was propelled by individuals willing to take on that risk, often representing a significant share of their own net worth, even up to 50%. As a result, they contributed to Bitcoin’s rise to a trillion-dollar asset, gaining influence and financial returns that institutions typically command. Now, as these institutions recognize Bitcoin’s potential and want a stake in it, they’re not pleased to find themselves following rather than leading.

That’s exactly the irony: all this talk about taxing Bitcoin seems like a strategic narrative while these institutions quietly increase their exposure. The more they ease into Bitcoin, the more they signal to others that it’s a viable asset -- effectively paving the way for broader adoption. It’s a fascinating cycle where the very entities that once hesitated now drive momentum, underscoring Bitcoin’s unique rise. It's fun to watch this play out in our time. It'll be interesting to see what history paints the 2009-2029 period as...

Bitcoin offers a hedge against traditional inflation but it's not entirely immune to government intervention. Capital gains taxes can significantly erode the value of long-term holdings, especially in high-inflationary environments.

Bitcoin might preserve wealth over the long term but the government's ability to tax realized gains can reduce its effectiveness as a pure inflation hedge.

Definitely. Anyone who is a firm believer knows this. If you know you're going to be locked in for a long time, you don't sell. You just hold your bitcoin. Everyone knows that Bitcoin will be priced much higher than it is currently being priced at and they speculate about it even. The only downside is always going to be increasing inflation but like I said, just buying Bitcoin gives an edge compared to people who don't and probably just save with commercial banks for 1.2% interest per year lmaoooo.

It's a riskier process than dealing with an exchange, that's for sure, we shouldn't rely on them. However, there are ways to stay relatively under the radar, at least for minor amounts under $500 per transaction, or more major ones through P2P exchanges. I highly doubt the average joe is going to face issues with the authorities, unless we're talking about extravagant amounts of money that are impossible to go undetected.

Taxes decrease our available income, and increase the price of goods and services which increase inflation even further in the long run. Having imposed taxes on cryptocurrencies may spark controversies and decrease their adoption.

Yeah, sadly that's true. Sometimes you can tell yourself that you live in a democracy but it feel like a dictatorship...

Buying bitcoin is not the only way of acquiring it. Bitcoin is money and money is earned!
For example a considerable portion of the coins I have today are earned; as in payments for various stuff I've done over the years... I have even sold stuff for bitcoin.

No, it doesn't matter. Democracy must be abolished so you can be allowed to be rich and happy.

I think it's risky to rely on (under the radar) methods for handling Bitcoin because that can lead to legal problems and financial issues down the line. If we only focus on inflation, we might miss how tax policies impact the market. An increase in taxes could cut down the money we have for investing, which could slow down Bitcoin's adoption. This kind of economic uncertainty could create instability that hurts Bitcoin's value. So, we really need to take tax concerns just as seriously as inflation.

There are always going to be ways to deal with Bitcoin "under the radar" and avoid taxes. Even though that might not always be possible, there are still ways to avoid the increasing taxation, which the OP mentioned and is frustrated about. Also, I agree with what you've said: we should currently worry about inflation more than a hypothetical increase in taxes, which would counter your gains from Bitcoin. The increasing living cost is a far more complicated and worrying issue that would actually hinder your available income, thus also the real value of your Bitcoin.

In my opinion, finance is not a science, but rather an art. Yes, the number of bitcoins is limited (their maximum number cannot exceed 21,000,000 coins).

At the same time, every time a user of the first cryptocurrency loses access to their bitcoins, their available number in the world decreases.

In addition, there are now a large number of surrogate bitcoins in the world - all kinds of derivatives, wrapped bitcoins, etc. All of them devalue the real real bitcoin. Thus, traditional financiers "rob" real bitcoin holders.

The government also "robs" bitcoin holders when it introduces taxation of bitcoin transactions or capital gains tax. The state did not participate in the creation of Bitcoin and its development, but now it wants to tax those who participated in the development of the Bitcoin ecosystem. This cannot be avoided. There are some economic theories that consider the state as a "stationary bandit". 

All this is evil, which we cannot cancel. However, by studying financial literacy, it is possible to minimize the financial damage from such actions of states and those in power.

Only we can do this - no one except us is interested in us making a profit.

Do you think you will have time to run when hyperinflation kicks in? Every country is subject to hyperinflation, so it’s better to have some assets that are immune to it.

/Over&Out.

You are lucky if this bill won't be propose in your country.

Denmark Tax Council recommends bill to tax unrealized crypto gains

But considering the current situation where we don’t pay taxes on unrealized gains, that’s fine. You hold Bitcoin to dodge inflation, so don’t sell too much if you want to avoid taxes. In the U.S., the average inflation rate is under 10%, so if you think holding Bitcoin will keep its value and fight inflation, you’re mistaken. A small percentage of inflation shouldn’t push you to invest everything in Bitcoin.

Now, if you’re living in a country with hyperinflation, that’s a different story - you should definitely be worried about that.

Fear of being robbed by the government is much greater than the fear of having assets that the government does not know about.

If you want to declare your holdings, you can do so in parts. Send a smaller amount to a new wallet and declare it. If asked for the source, you can say you mined it in the past when it was worth zero.
You are not legally required to remember all the wallets you have used in the past, so you can continue to declare other wallets in the future as you recall, you can say coins were sent to new wallet due to security reasons.
(This will only work with Monero.)

The government not knowing how much you have is the greatest power you hold over these crooks.
If fear is a factor in your finances, it's game over for you.

Yea, well, if i would have chosen to hide my crypto from the government and just not declared taxes, then i think i would live in constant fear to being found out and put into prison for years, like a drug dealer that has a lot of money but has to find all kinds of super-complicated constructs to be able to hide that and still spend some.

So then you have eg 10 million usd in crypto and you eg can't buy a house cause then government would know you have money that you didn't declare. I guess best way then would be to leave the country and join another one with no taxes on crypto. I also decided against that, i wanna be close to my family, friends, homecity.

Not buying Bitcoin on CEX? That's super cypherpunk, i guess people did only do that peer to peer buying with paypal in 2011 and 2012.

If a government can tax your bitcoins that means YOU didn't understand what Bitcoin is and you weren't buying Bitcoin, you were buying something to get rich quick. When you use centralized exchanges and comply with their KYC crap and give them all your information and "confess" to what you have, you are using Bitcoin wrong.

Bitcoin was created to give financial sovereignty, something you won't be able to have when registering with a CEX and complying with their KYC. Without it, the government won't be able to tax you!

Bitcoin is not created to be a hedge against inflation, that is just the side effect of the fiat system being flawed. When they print money, they ensure that the only money in existence (ie. Bitcoin) with a capped supply goes up in value therefore making it a good hedge against the fiat inflation.

That’s a common misconception in cryptocurrency circles.

Not everything rare increases in value; it must have certain qualities to stand out. Otherwise, it's just another old Lada headed for the scrapyard.

It's unrealistic for an asset to grow at the same rate every year - taxes would eat away your gains.
Imagine if you had to give a portion of your gold to the government every year - insane!

They will - simply because they can.

Leaving the country to avoid taxes is cost-effective only for millionaires.

I call that the non-deflated tax scam. To give an exaggerated example, let's suppose that in your country, as happened a couple of years ago, during one year inflation rises 10%. Let's also suppose that someone buys $100K in bitcoin and when the year ends sells it for $105K. The IRS will want to charge you 10% of that $5K of supposed profit when in reality, due to inflation caused by the government, the real purchasing power of the $105K is $94.5K and therefore you have not made any profit.

This, moreover, is taking into account the official inflation data which is manipulated downwards, but well, we have to base it on something.

In general a CPI of 10% is extraordinary and if it is maintained at an average of 3%, you will have made profits instead of losses, what happens is that they will be charging you more than they should according to the real purchasing power.

Inflation and taxation are different things. Bitcoin is inflationary, not deflationary till 2140 after all 21million bitcoins mined by miners and all total supply exists. Now it is inflationary but its inflation rate is smaller than fiat currencies and the rate can not be changed by anyone, any government.

About taxation, governments can tax their citizens but do you think higher tax rate on Bitcoin makes it the same like fiat currencies. I don't think so, honestly because purchasing power of Bitcoin increases with time, like its value growth, so it can outweigh tax rate on Bitcoin investment and gain while you will not get any profit by holding fiat currencies.

Compares them in whatever criteria, Bitcoin is better than fiat currencies, not the same.

Let's use an example in Italy.

Let's say your annual income is €50,000, which mean you need to pay (28,000 x 23%)+(21,999 x 35%)=  €14,140 for income tax.

Now you have €35,860 and you choose to hold it, if the inflation rate is 4%, in the next year your money will worth €34,067.

But, if you invest that in Bitcoin and the price rise for 20%, your money will worth €43,032 excluding tax, the capital gains tax in Italy is flat 26%. You need to pay €7,172 x 26% = €1,865, your end balance is €41,167.

Without investing in Bitcoin = €34,067
With investing in Bitcoin = €41,167

How does it's the same?

OP is not saying bitcoin or cryptocurrencies generally will not be taxed. What he is saying is that those coins (bitcoin specifically) will not be taxed if you do not sell it. That is how taxes are as unrealized profits are not taxed.

If you read about how rich men get richer, you will find out that what OP talked about is correct. Even rich men can go to the extent of borrowing money because they do not want to sell their property to pay tax because the interest rate on the money they borrow is less than the tax they want to pay if they sell their property.

Bitcoin gives you options, so even if the level of inflation went very high and governments taxed bitcoin holders at a very high rate, so much money in your wallets gives you the option to leave the country where you live to a different one that charges you low or no taxes on your bitcoin holdings, so this is only a problem to the small holders and not to those that benefit the most from the scenario the OP is bringing up.

Like you said, as long as you don't sell, you should be good to go and the only concern would be inflation. Now, here's how I like to look at it: It would be a lot worse for people that do not own bitcoin because whatever fiat money they have get destroyed by inflation but with bitcoin, you still have upside potential (probably downside potential too if entry is super high). So Bitcoin actually gives an edge vs other people that don't use or hold Bitcoin.

Taxes and inflation will forever be a thing. Likewise Bitcoin.

Your thinking could be wrong as well. So what's the point of worrying over something that we ain't sure that it will happen. What if there are still crazy gains? Why not live in the present and allow bitcoin to sort itself out when we get to that late majority adoption stage you are talking about. And you don't even know when that stage will happen. Bitcoin is still growing, and we don't know when the late majority will happen. Bitcoin is heading towards two decades now, but it still feels like it was invented yesterday. So it might take many years or more for the stage you are talking about to happen, and who knows how many of us might be alive to witness that stage.

Apart from inflation and taxes on asset ownership, of course we can't avoid it as long as there are policies that regulate asset ownership, be it bitcoin or other crypto when you sell it and convert it to fiat which the country where you live sets the regulations. But try to choose whether it is better to pay tax on asset income or the country does not set asset regulations? in other words, crypto asset ownership is illegal. So rather than complaining about the tax percentage, out there there are countries that still set illegal laws against assets such as bitcoin.

You basically created an argument and the counter argument for why it doesn't work exactly that way.

Taxes are not a substitute for inflation, you will be taxed whether or not inflation eats into your holdings, so being taxed does not negate the fact that with bitcoin the value of your savings will not be constantly shrinking.

Taxes also work differently depending on where you live, there is no universal percentage you pay and in some countries Bitcoin isn't taxed at all.

Paying of tax have been into existence over centuries, we have to pay it for the government to be able to make use of all payments on tax for the welfare and development of the society in which we live in, we cannot compare paying tax to that of an inflation, they are two different things, bitcoin conquered them all and you can just make use of this digital currency without having to struggle in paying tax and evading inflation.

I am just thinking:
Yea, governments cannot print more Bitcoin. So yea, i am 'save from inflation'.

But: they just tax my profits.
That's basically the same?

1. They print fiat.
2. Every rare good on earth rises in price. Also Bitcoin.
But perhaps the buying-power keeps even exactly the same (cause everything costs more). Buying-power could even shrink while price rises in fiat terms.
3. But then they tax my 'profit', eg 28%

Imagine i always hold my buying power because Bitcoin rises with inflation, but whenever i sell Bitcoin i gotta pay those eg 28% of my profits.
Does it really matter if the state takes away my money by inflation or by taxes?

Inflation makes it that basically your assets rise and rise in dollar terms, buying power stays the same, but i have 'high profits' that have to be taxed.
I guess worst case i could imagine very high inflation, basically nearly all my principal is profit and then i get 40% taxed on it.

Once Bitcoin is in late mayority of adoption stage i think there will be no more cracy gains, it will just be a bit better than gold, keeping up with inflation. The more inflation, the more taxes you pay. So basically eg with 40% tax you are only saved from around 60% of the fiat-inflation.


Counter:
I guess taxes are cheaper than inflation. (eg 30% tax means i guess you are saved from around 70% of the inflation)
You only get taxed if you sell (unless they really go for taxing unrealized gains).
I guess governments cannot practically rise taxes superhigh cause people flee the country or smth.
I guess taxing crypto different then other asset classes hopefully doesn't fly.
Stocks and real estate are also taxed, still people who hold stocks and real estate are doing much much better with inflation than non-holders.