Euro am Sunday: Digital currencies: Days of testing for crypto fans | news


by Florian Hielscher, Euro on Sunday

Looking at Coinbase’s stock price should not make Brian Armstrong happy at the moment. As CEO of the U.S. cryptocurrency trading platform, he owns about one-fifth of the shares, according to Forbes magazine. The weakness in cryptocurrencies, which has lasted for weeks and recently ended in a crash, weighed on the price of Coinbase securities and thus Armstrong’s assets. The stock, meanwhile, has fallen about 80 percent from its highest. Armstrong notices that, too. According to Bloomberg, he still had assets in the tens of billions of dollars last November.

In addition to billions, the extreme turbulence also affected many small investors. Cyber ​​currencies like Bitcoin had recently weakened and the price had dropped markedly since the beginning of the month. In the past week, the rates of several cyber currencies have since collapsed drastically. According to a report by the news portal Bloomberg, about $ 200 billion in value was destroyed in the cryptocurrency market in a single day. That’s about the same as the market value of the giant Shell.

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The environment for cryptocurrencies was already cloudy in the weeks before. Particularly due to the war in Ukraine and rising interest rates, investors have withdrawn their money from more risky asset classes, which include cyber currencies. The trigger for the recent fall in prices in several cryptocurrencies was the stablecoin TerraUSD. A stablecoin, by its name, is considered to be very stable because it is pegged to a fiat currency, a state-subsidized currency that is legal for payment. Stablecoins, for example, are pegged to the US dollar in a one-to-one ratio and should therefore hardly fluctuate. It was different with TerraUSD: Instead of US dollars, TerraUSD is exchanged for the cryptocurrency Luna. So if the investor sells a TerraUSD, he receives Luna worth one US dollar and vice versa.

This system worked well for a while, but recently TerraUSD fell massively in value and deviated significantly from its target relationship with the dollar. Therefore, more and more Luna coins had to be paid out, which caused the price of this cryptocurrency to collapse. While in early May you paid around 80 euros for a unit of the currency, today it is almost worthless. The organization behind TerraUSD and Luna, the Luna Foundation Guard (LFG), allegedly sold bitcoins for more than $ 1 billion. With this, LFG would probably secure liquidity for its own projects, but at the same time also pushed down the price of the largest cryptocurrency. The fact that a stablecoin of all things is causing enormous turbulence among the naturally volatile cyber currencies weighed on investors’ confidence in digital currencies. They differed from their investments galore.

Great crisis of confidence

The idea that cryptocurrencies like Bitcoin can even serve as a substitute for gold has been thoroughly refuted in recent weeks. TerraUSD’s decline accelerated an ongoing decline in the value of cyber-FX. Like gold, bitcoin was considered a remedy against inflation, also because its quantity is limited: a maximum of 21 million bitcoins can be “sharpened”. According to data from the statistics portal Statista, 19 million of these are already in circulation. However, the fact that Bitcoin is scarce has not helped him lately: Neither the war in Eastern Europe nor the economic environment with high inflation and higher interest rates made investors flee to Bitcoin. Instead, they withdrew their investments from risky asset classes and switched to more defensive stocks, bonds or even gold. Cryptocurrencies, on the other hand, moved down with the shares of tech companies, reinforcing their correlation with tech stocks.

Comparing the percentage changes in the two major cryptocurrencies, Bitcoin and Ethereum, with the technology-heavy Nasdaq Composite stock index over the past six months, it is striking: on the one hand, Bitcoin and Ethereum developed very similarly over time. On the other hand, price developments make the correlation between cryptocurrencies and stocks from the technology sector clear. If stocks fell, cyber currencies lost too, if stocks recovered, cryptocurrencies won too. However, the price development of Bitcoin and Ethereum was permanently below the stock index, and there were also stronger fluctuations up and down.

the interests of the institutions

So should we now turn our backs on Bitcoin, Ethereum, Dogecoin and other cryptocurrencies? Not when it comes to analyst Sren Hettler from DZ Bank. It refers to the cloudy conditions, such as the global monetary policy and risk aversion in the markets. Nevertheless, the convinced fan base and companies building their business model on Bitcoin are making him optimistic. He doubts that institutional investors will say goodbye to cyber currencies as a result of the fall in prices: “Should the framework conditions change again in favor of Bitcoin, they should have no problems reintegrating the cryptocurrency into their portfolio to a greater extent. ”

Goldman Sachs recently showed what institutional market participants can do this way. Despite Bitcoin’s high volatility and recent weak performance, the US investment bank was the first major Wall Street house to announce a loan secured by Bitcoin. The most important cyber currency is used as collateral for a cash loan. According to a report from the news portal Bloomberg, the borrower is Coinbase. The crypto platform is thus making another attempt to bring money from Wall Street to the world of digital assets. There is no information on the exact loan amount.

Security effect in crypto companies

While financial institutions are slowly opening up to deal with cyber currencies, some companies are already getting involved in cryptocurrencies. They and their shareholders are so affected by fluctuations in Bitcoin, Ethereum and others. For example, shares in the cryptocurrency exchange Coinbase lost more than a quarter in value on the day of the cyberforex crash. In addition, the company had presented weaker figures than the market had expected the day before. Also at MicroStrategy, the papers fell markedly. The software company reported more than 129,000 Bitcoin worth $ 2.9 billion on the balance sheet for the quarter ending March. Americans are among the companies that invest the most in cyber currencies.

This ensures that the stock is heavily dependent on the price development of cyber currencies: When Bitcoin began to recover after the collapse, the company’s shares got double-digit. It was a similar story with Coinbase’s shares. In the recovery in cryptocurrencies, the stock rose again. Thus, Brian Armstrong can hope to recover some of his billions in losses. Then he should be able to look at his company’s share price again with greater joy.

Taxation specified:


With a new letter, the Federal Ministry of Finance (BMF) has now bindingly regulated how profits from crypto investments are to be taxed (Gz. IV C 1 – S 2256/19/10003: 001). In principle, this applies to all profits made with cryptocurrencies speculation period from one year. From a tax perspective, cryptocurrencies are classified as “other economic goods”. Who coins after this holding period sold, collects profits tax-free. In case of withdrawal within twelve months, it is tax-free limit for private sales transactions (600 euros). However, if the profit realized in this way is only one euro higher, the personal tax rate (14 to 42 percent, depending on the taxable income) is due to the entire increase in value.

Anyone who exchanges Bitcoin for other cryptocurrencies or pays for a product with it draws a “tax eventThese transactions fall into the category of “private currency transactions”. The extension of the speculation period from one to ten years using cryptocurrencies for efforts and lending, which is still planned in the draft BMF letter, will not be implemented. also occur for cryptocurrencies Affects savings plans that work with indices from multiple digital currencies As their composition is constantly changing, investors must prove how long the individual currencies have been in the portfolio to remain fiscally correct Investment risk decreases, but it becomes more complicated for tax returns and for investors more difficult to document. procurement processes must be noted carefully.

To the Finance Act profit calculation For crypto investments, the purchase price must be deducted from the settlement price. Investors have two options for this: With the FIFO method (“first in – first out”), the first purchased coins are also the first to be considered dry again. What is new is that the average method is also allowed. Profits are determined based on the average price, for example, of all Bitcoin purchased. As long as investors have not received a tax assessment from the tax office or have filed a tax return, they can rely on the one-year holding period.

INVESTOR INFO

As a trading platform for cryptocurrencies, Coinbase benefits from rising and falling prices as long as the trading volume is right. However, both this and sales fell in the first quarter. Coinbase is well positioned in the growing crypto market and offers a variety of coins and NFTs. The company recently drew attention to itself with the statement that in the event of bankruptcy, client investments may become part of the insolvency estate. A bet worth at the current level for investors who are very willing to take risks.

The company has nearly 130,000 bitcoin at an average purchase price of $ 30,700. The position makes the stock highly dependent on the course of the crypto market. Despite the decline in value, bitcoin stocks still cover a large portion of the market value. However, MicroStrategy has taken on a number of debts, including the purchase of Bitcoin. If Bitcoin recovers, the risky strategy offers leveraged opportunities. Only for the very brave.

The VanEck product offers indirect access to Bitcoin for investors without their own wallet and approximates the price development of the cryptocurrency. As the main cyber currency, Bitcoin should benefit from a recovery in the crypto market. The long-term outlook is good, companies and institutions are primarily dependent on Bitcoin for cryptocurrencies. The brave use VanEck’s product for an indirect (re) purchase of Bitcoin.

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