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Institutional Impact: IRS Enacts New Crypto Tax Rules, Bitcoin ETF Hype Explodes

Institutional Impact: IRS Enacts New Crypto Tax Rules, Bitcoin ETF Hype Explodes

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New US cryptocurrency regulations now require reporting on all crypto transactions over $10,000, but open questions around compliance pose hurdles. The recently enacted rules mandate submitting extensive personal details to the IRS within 15 days for transfers above the threshold. However, ambiguities persist around issues like identification and valuation, while lawsuits questioning the law’s constitutionality continue.

As speculation mounts over a potential spot Bitcoin ETF decision this week, analysts have worked to temper expectations of any imminent announcement. Tweets from journalists and executives citing insider sources predicting approvals within days have continued to fuel hype. However, analysts note the public comment period extends into Friday night. Moreover, behind-the-scenes SEC feedback and final proposal filings from various issuers remain ongoing. Approval likely hinges on cleared 19b-4 applications, which Bloomberg expects next week instead.

As the imminent impact of institutions to crypto approaches, BitMEX founder Arthur Hayes predicts Bitcoin could see a sharp 20-30% correction by March even if the spot ETFs are approved. He sees a brewing “liquidity rug pull” driven by changes in Fed policy programs. Resulting financial strains could then spiral into bank failures and broader market declines. Hayes believes the hype around a Bitcoin ETF launch could lift prices enough beforehand to worsen any pullback. However, he remains fundamentally bullish on Bitcoin over the long term as a crisis currency uncorrelated to the traditional financial system.

Today’s Newsletter

  • New US regulation requires reporting of all crypto transactions over $10,000 to IRS
  • ‘Rumor mill’ goes into overdrive for a spot Bitcoin ETF approval on Friday
  • Bitcoin may see sharp correction upon spot ETF approval, predicts Bitmex founder Arthur Hayes

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Data powered by CoinGecko.

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REGULATIONS

New US regulation requires reporting of all crypto transactions over $10,000 to IRS

A new US law requires reporting cryptocurrency transactions over $10,000 to the IRS within 15 days, but uncertainty remains around compliance. The provision, which took effect January 1 as part of broader infrastructure legislation, mandates submitting extensive personal details on recipients of crypto funds. However, open questions persist around issues like identifying counterparties for miners, donors, and DEX traders.

While the self-executing statute carries the threat of felony charges for non-compliance, ambiguities in the current reporting procedures pose practical challenges. The applicable form and exact valuation calculations for the $10,000 threshold still require clarification from the IRS. Lawsuits questioning the constitutionality continue as well, though the law remains enforceable for now. This leaves cryptocurrency users and organizations transacting over $10,000 with legal uncertainty around satisfying the detailed reporting requirements. [cryptobriefing]

MARKETS

‘Rumor mill’ goes into overdrive for a spot Bitcoin ETF approval on Friday

Rumors and speculation over potential spot Bitcoin exchange-traded fund (ETF) approvals by the SEC intensified this week across social media. Tweets from a TechCrunch reporter and Grayscale executives citing insider sources and progress on “forms” fueled hopes that the long-awaited ETFs may finally receive approval within days. However, analysts have thrown cold water on prospects for immediate approval, expecting decisions next week instead once public comments close and final proposals are filed.

While traders and speculators fixated over cryptic social media posts hinting at imminent news, experts at firms like Bloomberg noted behind-the-scenes work remains. Approval likely hinges on cleared 19b-4 applications, which Bloomberg expects between January 8-10. The frenzy stemmed from tweets by a journalist and Grayscale CFO, in addition to Bitcoin bouncing back 3.4% in price. Still, analysts say final SEC feedback and documents from several firms in the running need finalization first. Fourteen companies currently await a spot Bitcoin ETF decision. [cointelegraph]

BITCOIN

Bitcoin may see sharp correction upon spot ETF approval, predicts Bitmex founder Arthur Hayes

BitMEX founder Arthur Hayes predicts Bitcoin could see a sharp 20-30% correction in March triggered by impending issues in traditional finance, even if the long-awaited spot BTC exchange-traded funds (ETFs) get approved. However, he believes Bitcoin will rebound heading into late 2024 while other assets languish.

Hayes sees a potential “liquidity rug pull” driven by declining Reverse Repo balances, expiration of emergency Fed lending programs, and interest rate cuts. This could spur bank failures and a domino effect leading to broader market declines. If spot Bitcoin ETF hype already lifted BTC’s price by then, Hayes says approval could exacerbate the pullback to 30-40%. Nonetheless, he remains fundamentally bullish on Bitcoin’s role as a “neutral reserve hard currency” uncorrelated to the traditional system long-term. So any early 2024 correction would prove temporary in his view. [cryptobriefing]

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Other News

SEI Network hits all-time high, memecoin SEIYAN leads with 380% surge

SEC has been ‘backed into a corner’ on BTC ETF approval — Bloomberg analyst. [cointelegraph]

U.S. Sec seeks to leverage terraform win in coinbase, binance disputes. [coindesk]

Celsius to unstake thousands of ether, possibly easing ETH selling pressure. [coindesk]

VanEck pledges 5% of spot Bitcoin ETF profits to core devs after SEC approval. [cointelegraph]

Solana plans expansion into Brazil with $10 million investment

Ethereum validator exit queue spikes as Celsius, Figment withdraw stakes. [theblock]

Taiwanese crypto exchange founder arrested for fraud: Report. [cointelegraph]

Huobi Korea shuts down platform citing business difficulties. [theblock]

ENS token surges 70% as Vitalik Buterin lauds platform as ‘super important’. [cointelegraph]

BlackRock expected to seed ETF with $10M worth of BTC. [cointelegraph]

Cathie wood’s ark invest offloads $25m of coinbase shares. [coindesk]

Radiant Capital reportedly hacked for $4.5 million worth of ETH. [theblock]

Binance places privacy coins Monero, Zcash and others for possible delisting

Bitcoin derivatives traders are bracing for increased market volatility, according to Bitfinex. [theblock]

CertiK’s X account gets hacked, sends out fake vulnerability warning about Uniswap

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Next Week’s Token Unlocks

  • APT is set to unlock $239.98M, maintaining its strong market position with a market cap of $2.97B.
  • MANA will see an unlock of $63.35k, reinforcing its market cap of $840.04M.
  • 1INCH plans to unlock $15.53k, aligning with its market cap of $547.58M.
  • GMX’s unlock of $21.49k will be noted along with its market cap of $497.40M.
  • GLMR’s upcoming unlock of $1.25M will complement its market cap of $332.19M.
  • HFT will unlock $4.99M, supporting its market cap of $103.88M.
  • PENDLE is anticipated to have an unlock of $63.20k, contributing to its market valuation of $128.94M.

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