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iTrust Daily Insight

iTrust Daily Insight
Afternoon Edition 8.21.2019

IRS letters may be causing a little scare today

Digital currencies are generally down 3-6% today (source: CoinMarketCap.com, looking only at coins with $1 billion+ in market value).
The only “big” news we see today is that Germany tried selling 30 year bonds with a negative yield for the first time.  It failed.  It sold about Euro 824 million of bonds but wanted to sell Euro 2 billion.  That means the Bundesbank (Germany’s central bank) will retain Euro 1.2 billion of the German 30 year bonds and sell them to the market over time.  Such a big bond failure really is a pretty big deal.  “Quantitative Easing” requires the European Central Bank (ECB) to issue more Euros and then buy bonds from its constituent country central banks.  A failure like today might indicate that the Euro currency will be stronger going forward than it otherwise would have been, but the Euro currency is little changed today against the US dollar, the British pound and the Japanese yen, so, in the market most likely most directly affected by the auction fail today, the currency traders seem to be little troubled.

Otherwise, there seems to be little else from all of today’s price signals and news events which might explain today’s big downward moves in digital currency prices.

From what we can tell, today’s downward price action in digital currencies might be entirely explained by some investors’ starting to get some scary letters from the IRS about failure to report.

As such, we want to keep today’s note short and point to some documents from the IRS.

In the first link below is the guidance provided by the IRS in 2014:
https://www.irs.gov/pub/irs-drop/n-14-21.pdf
The reason reporting requirements when using or trading digital currencies is so onerous is explained in this 2014 guidance.

It may be true that there are some global events regarding worries in China or Venezuela or North Korea or Argentina or the UK that are impacting the values of digital currencies today.  If so, it is not yet apparent to us.

As such, we are concerned some traders who are trading digital currencies in their taxable trading accounts may have been spooked by the letters recently sent by the IRS: the below link includes a press release and links to the three warning letters the IRS is sending to owners of digital currencies:
https://www.irs.gov/newsroom/irs-has-begun-sending-letters-to-virtual-currency-owners-advising-them-to-pay-back-taxes-file-amended-returns-part-of-agencys-larger-efforts

Today, I think it is our job here at iTrust Capital merely to inform what MAY be causing the price drop in digital currencies.  That price drop may be caused by digital currency holders’ receiving these letters from the IRS.

If so, we can only suggest traders who want to continue trading digital currencies look to ways they might be able to trade in accounts that reduce their reporting requirements and do so on trading platforms with minimal transaction fees.

Setting up or rolling over IRA or 401k assets to iTrust Capital and trading digital assets at a 1% commission may be the right solution.  We invite you to shop around and find the best solution for you.  Please email Blake Skadron (founder & head of business development) if you have any questions.  

Tim Shaler is Chief Economist of iTrust Capital.  He is a published Real Estate economist, was a portfolio manager and asset allocation expert at his previous firms and is an adjunct professor at Webster University. His MBA (Finance) and MA in Russian Economic History are both from the University of Chicago.

For all media inquiries, please contact Blake Skadron at b.skadron@itrustcapital.com

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