The Crypto Tax Center

The Crypto Tax Center aims to provide, in a fun and informative way, timely, accurate and relevant information related to the income tax effects of owning, trading and spending all forms of cryptocurrencies.  To stay up to date on the latest policy changes and how they may affect you as an investor, be sure to sign up for email updates.



How to Calculate your Basis in Bitcoin and Other Cryptocurrencies

So it’s finally time.  You got that last-long awaited W-2 and have compiled all of your crypto transactions into one gigantic spreadsheet, and it is time to follow that time-honored tradition of reporting your earnings and paying your taxes because we all like roads, parks, and military superiority, right?

The challenge of filing your return boils down to this: When is a gain reportable and what is the basis?

Depending on whether you are a day trader or a HODLer like me, the difficulty in making those determinations can vary widely.

Well, fear not because, as the title indicates, I am going to show you how to figure out what the heck you gained and what the heck you owe.

I considered adding a subtitle: “Why, oh why, did I choose to day trade?  LIFO, FIFO, Long-Term, Short-Term – I’ll never figure all this mess this out.  Oh, Roger Ver!  Will you please hurry up and establish your Libertarian country so I can move there and be free of all this tax chaos?”

But then I realized I don’t want to live in such close proximity to Roger Ver, even if he did tone down his use of Bitcoin’s twitter account to pump Bitcoin Cash.

So let me start with an example to easily help you determine when you have a taxable gain.  The accounting language we use is if the gain has been realized or remains unrealized, and it is actually quite simple.

If you bought a bitcoin in 2017 for $2,000 and still have it today, it is worth, $20,000, oh – $14,000, crap! –  $8,900, relief – $10,500.  Good grief, the market is volatile right now.  For the sake of this example, let’s just say $10,000.  Your Bitcoin being at $10,000 today is a true gain of $8,000 but because you haven’t “realized” that gain by selling your Bitcoin, you have not triggered a taxable event.  Therefore, you have an unrealized gain and nothing to report to the IRS so life is good.  On paper, you are $8,000 richer, but the IRS can’t charge you for that.

On the other hand, if you sold your Bitcoin for $10,000 on or before December 31, 2017, after buying it for $2,000 earlier in 2017, you have “realized” that gain of $8,000 and triggered a taxable event – specifically, a short-term capital gain.  If you held it for longer than a year, it is a long-term gain.  I won’t expand on that here since I have covered long-term and short-term gains sufficiently in What is The Cryptocurrency Tax Fairness Act of 2017 and how could it affect my Bitcoin transactions?

Now, we have been doing a little basic math here.  $10,000 – $2,000 = $8,000.  In that equation, the $10,000 represents the Fair Market Value, the $8,000 represents the gain and the $2,000 represents your basis, or cost.  It really is just about that simple.  Basis means cost.  Or, more specifically, all costs incurred in the acquisition of the asset.  That means you can add to your basis any fees or other charges associated with the acquisition.

For example, let’s say you used Coinbase to make your crypto purchase and paid a fee of $30 to buy that $2,000 of Bitcoin.

Side note ->  Before I continue, I know someone is skipping to the end already to comment to me that I’d be an idiot to use Coinbase to buy anything when I can transfer everything for free to GDAX and pay no fees on a limit order.  I can assure you, I and the 60,000 Youtube content creators claiming to have just “discovered” this tip on their own are aware of this.  This is just an example to show how to treat a fee.  Now go delete your comment and chill out.

So you paid a $30 fee to acquire that $2,000 Bitcoin.  Because the fee was a cost of acquiring the Bitcoin, you add it to your basis which becomes, in fact, $2,030.  That means your gain is actually only $7,970.00.

You can also deduct the cost of any fees associated with selling your Bitcoin so if it cost you another $30 to sell it, then you would report that as a deductible fee against the gain and reduce the capital gain to $7,940.00.

That, in a nutshell, is how you calculate your basis, your realized gain, and what you report to the IRS.

Like all things associated with the IRS, however, things tend to be much more complex.

For example, let’s assume you don’t have $2,000 to drop on Bitcoin at any given time so you have purchased $200 in Bitcoin per week since October effectively dollar cost averaging your purchase.

Using real, historical  prices now, that means that, roughly, you made the following purchases.


Following that methodology, on December 31, 2017, you own just over 0.22 Bitcoin with an overall basis of $2,000.  On December 31, the price of Bitcoin closed at $14,156.40, so the value of your investment at 12/31/17 is $3,167.68, giving you an unrealized gain of $1,167.68.  Not bad.  Would have been a lot better if you could have picked up a whole Bitcoin at $2,000 back in July but you missed the early train same as me.  Talk about a validation for FOMO.

Now, the fun part.  Let’s pretend that on December 31st, you needed to sell some Bitcoin to cover the cost of the new mining rig Santa brought you.  So how do you account for which Satoshis you sold and what your basis was in those specific trades?

First, I need to make a correction.  See two paragraphs ago where I said you have an overall basis of $2,000?  Well, smack my hand because you can’t think of an “overall basis” in terms of your taxable gains and losses. You have to identify each transaction individually to determine the basis and subsequent realized gain or loss on what you sell.

Two common methods of identification are First-In-First-Out (FIFO) and Last-In-First-Out (LIFO).  They mean exactly what they say.  FIFO means you sell the oldest (or “first in”) asset in your holdings.  LIFO means you sell the most recently purchased (or “last in”).

Generally speaking, in times of rising prices, it is most tax beneficial to utilize LIFO.

Think about that.  Prices generally rose from October to December.  Would you rather sell your First-In Bitcoin purchased October 23rd, realizing a gain of $277.42, or would you rather sell the Last-In Bitcoin purchased on December 25th and realize a gain of $1.85?  I’d much rather pay tax on $1.85 than $277.

Likewise, in times of falling prices, it is frequently more tax beneficial to utilize FIFO which will create the bigger loss.  Of course, you can only take the capital loss to offset against existing capital gains but you can carry the loss forward into future tax years if you can’t use it all in this year.  This is the part where I again remind you to read my previous columns and, more importantly, consult with your tax professional.

Also, you should know that the default assumption by the IRS is that you are selling everything FIFO – of course, because that most often creates the largest gain and the biggest tax revenue for them.  The burden is on you to document if you use a method other than FIFO and ensure that you track everything very carefully.

Another method I haven’t mentioned yet is Specific Identification.  This is more challenging in that it requires a more detailed level of tracking but it can be the most beneficial because you can take advantage of the benefits of both LIFO and FIFO, depending upon the current environment, by handpicking which portions of your Bitcoin you will sell specifically.

So, for example, let’s say you need about $800 to cover that mining rig.  You could sell the Bitcoin acquired on November 27th, and December 11th, 18th, and 25th, but not that purchased on December 4th.  That would put $805.51 in your pocket and result in a realized net capital gain of only $5.51, and you are not left with any Loss Carryforward like you would be by selecting December 4th instead of November 27th.

I feel like I need to touch again briefly on a topic I have addressed more specifically in Will we finally get some relief from taxes on our Crypto? (U.S. Tax Code).  That is trading cryptocurrency for cryptocurrency.  If you exchange Bitcoin for Stellar Lumens for example, you are deemed to have sold your Bitcoin for fiat currency at its market price at that moment and purchased Stellar Lumens for their value in Fiat currency at that moment as well.  Although we all know it is a trade, it is deemed to be a separated sale and subsequent purchase thereby creating a taxable gain or loss on the Bitcoin and establishing a new basis for the Stellar Lumens.

Yep, this stuff is complex.  And, honestly, even though you are smart enough to figure out investing in crypto, you cannot get what you need to prepare a tax return from a column like this.  What you can get from a blog like mine is a strong general knowledge that enables you to speak the same language, ask the right questions, and compile and provide the necessary data when meeting with your personal tax professional.

Even if they are new to the crypto space, they have spent a ton of time educating themselves on how to best handle every single scenario they might face and how to thoroughly research new ones like crypto.  And since the tax code has sweeping changes for 2018, they get to do all the research and study again to figure out what best suits your tax situation next year.  But the bottom line is, doing your part by reading columns like this saves your tax professional from spending time educating you on the basics, and saving their time means you get to keep more of your crypto gains for yourself.

As usual, feel free to subscribe for future updates, and when your tax professional marvels at your foundational knowledge and intellect, please consider making a small donation so my wife will quit griping about how much time I waste “goofing around with crypto.” Support The Crypto Tax Center

© Michael L. Collins

Is Uncle Sam setting up the foundations to Big Brother your Crypto? (U.S. Tax Code)

In my previous column, I hinted that we might all go to jail for money laundering.  While that was a lighthearted reference to today’s topic, Senate Bill 1241, which aims to tighten the controls on money laundering, counterfeiting, and bulk currency smuggling primarily in an effort to reduce the funding of terrorism, the bill actually does throw out a few zingers at the crypto space.

I’ve heard quite a ruckus about this bill so decided to take a look at it myself.  It was introduced in the Senate in May but was referred to the Senate judiciary Committee November 28th and, in its pure form, it really does just appear to be designed to strengthen regulation against money laundering, which is a crime perpetrated to make money earned from another crime seem like legitimate income.  Think of the whole garbage and construction businesses in the Sopranos.  If you haven’t seen the Sopranos, stop reading immediately and go binge the entire series.  I’ll wait here.

The crypto community seems to be up in arms partially because digital currency is specifically mentioned in a bill with such negative connotations.  The truth is, digital currency is mentioned in a lot of bills with negative connotations.  Countering Iran’s Destabilizing Activities Act of 2017 is about as negative a connotation as you can have, and it directly names digital currencies as a means by which this could be accomplished.

I think the simple rule for us legitimate, law-abiding crypto HODLers and traders is to simply not do crime with our crypto.  Easey Peasey.  We make bundles of money, legally, and can all sleep at night.

That said, there are a couple of other pretty concerning references to cryptocurrency in this bill if you dig deeply enough.

The bill itself establishes that cryptocurrency is a means by which money laundering or bulk currency smuggling can occur.  Not a big deal in itself until you see that the bill seeks to establish that the money laundering statute will apply to tax evasion.

The specific language is this:


     ‘‘(ii) with the intent to engage in conduct constituting a violation of section 7201 or 7206        of the Internal Revenue Code of 1986;’’

Section 7201 of the internal revenue code is entitled, Attempt to evade or defeat tax, and Section 7206 of the Internal Revenue Code is entitled, Fraud and false statements. 

 I have included the exact language of both sections here (US Code Sections 7201 & 7206) if you want to read them in detail but just know that, in general, efforts to evade tax, when prosecuted, can result in serious jail time and monetary penalties.


Not “uh oh” for me, cause I am going to pay Uncle Sam every penny I owe. which is a lot of pennies and not a lot of dollars.  But, given that so many in the crypto space seem intent on avoiding the reporting of taxable income related to crypto, it could be an “uh-oh” for many somebodies.

To be completely honest, though, none of that is new.  There have always been significant penalties for tax evasion and they haven’t changed with this bill.  They are just being folded into the criteria defining money laundering.  Why?

That is where what I believe is the scariest point related to this bill comes into play, Section 10, entitled:


Specifically, Section 10 aims to include offenses related to (among others) violations of US Code Section 5324 of the Internal Revenue Code which prohibits the intentional structuring of transactions to avoid reporting requirements for taxable income.  This is frequently referred to as “structuring” or “smurfing” in the non-crypto world.  If you read my last column, Will we finally get some relief from taxes on our crypto? I joked about buying a Lambo with 350+ transactions of $599.99 to avoid taxable reporting under the potential new tax rules.  Doing exactly that would be considered structuring by the Feds.

There are currently no real world examples of how exactly this would apply in the crypto space, but I have read an interesting, although somewhat dated, article here:  http://www.fraudsandscams.com/Commentaries/Smurfing.htm

 I suppose the bottom line for me after reading through this piece of the bill can be summarized using simple logic in a nice little if…then statement:  If the bill aims to restore wiretap authority for money laundering and counterfeiting offenses and the bill aims to apply the money laundering statute to tax evasion, then Uncle Sam can wiretap anyone suspected of avoiding income taxes.

In an environment that values anonymity and seeks to enhance the widespread benefits of decentralization, wiretapping at the source (i.e. the personal internet activity of the individual initiating the transactions) could pretty much do away with any anonymity.

All that said, I don’t believe that you will start seeing white vans with guys in black suits running sophisticated electronic monitoring equipment parked on your street anytime in the near or distant future.  I suspect that just like they have set an example with Coinbase (we’ve all by now seen the pop-up message to “please pay your taxes” when you log in), the IRS will find some gross violator and maybe wiretap them (if this bill passes) and prosecute just to show the gazillion small-time investors that it can be done, thereby encouraging them to report.

As an investor and a CPA, let me say that I too encourage you to report, but not because I do not value personal freedom.  Simply put, there is too much legal money to be made by us early adopters through legitimizing cryptocurrency in the public eye and drawing more investors into the space.  The high-risk bet of “saving” money on taxes by failing or refusing to report crypto gains is not likely to pay off in the long run compared to the trillions at stake in market capitalization as crypto is increasingly recognized more and more as a legitimate investment.

As usual, feel free to subscribe by providing your email for updates whenever I publish a new column and if you have found anything I have published of value, please consider a donation to the Crypto Tax Center by clicking here: Support The Crypto Tax Center

© Michael L. Collins

Will we finally get some relief from taxes on our Crypto? (U.S. Tax Code)

The answer is, “Maybe” but we might all go to jail for money laundering as well.

A brief search through the various bills introduced by the 115th Congress reveals at least 15 which at least mention cryptocurrency, digital currency, or virtual currency.  Their topics are as widely varied as the ICOs being pumped out now on an almost daily basis.

These bills range from Senate Bill S722 – Countering Iran’s Destabilizing Activities Act of 2017 to HR 4530 GAME Act of 2017, which essentially includes language that gambling with “virtual currencies” will be subject to the same rules and regulations as gambling with fiat currency.

It does seem somewhat ironic that the official IRS stance still maintains that cryptocurrency is property while our legislators identify it as having similarities with other forms of currency.  I guess, technically, you could go out and bet your house (aka “property”) on a wager, but clearly the point of this bill is that cryptocurrencies have become an additional viable means to participate in various forms of gaming.

A couple of bills stood out to my particular interests:  H.R. 3708 – To amend the Internal Revenue Code of 1986 to exclude from gross income de minimis gains from certain sales or exchanges of virtual currency, and for other purposes, and Senate Bill S1241 – Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017

Both of these bills could have significant impacts on the cryptocurrency space for multiple reasons.  To ensure I give each of them the appropriate amount of attention they deserve, I will focus on HR3708 in this column and follow up with a second column on S1241 within the next day or two.

I wrote about the foundations of today’s topic, HR3708, in a previous column – What is The Cryptocurrency Tax Fairness Act of 2017 and how could it affect my Bitcoin transactions? The bill was introduced in September and was promptly referred to the House Committee on Ways and Means.  It sought to introduce an exemption of $600 in cryptocurrency transactions from income taxes and capital gains taxes.  It was a favorable bill for those of us trading in cryptocurrencies which as of today, is still a very unfriendly tax environment – especially for those that spend their cryptocurrency like money and don’t utilize it so much as a store of wealth.

Unfortunately, this bill has apparently made no further progress.  But, have faith, dear reader, for there is an alternative – House Concurrent Resolution 97, Directing the Clerk of the House of Representatives to make corrections in the enrollment of H.R. 1.

Before I delve too deeply into what HCR97 aims to achieve, I need to provide a little background.

After a series of convoluted machinations, amendments, and reconciliation with the Senate bill, HR1 ultimately transformed into the gigantic tax reform bill signed into law by President Trump on December 22nd, making significant changes to the Internal Revenue Code of 1986 for both individuals and corporations.  Depending on whether you listen to Fox or CNN, it is either the biggest tax cut for the middle class in decades or the biggest corporate tax cut ever, carried on the backs of the middle class.

Whichever is closer to the truth, one thing is for sure:  I have no earthly idea.  I asked my sister, who is also a CPA with a thriving tax practice, and her thoughts were similar.  They doubled the standard deduction, which is good, but they reduced exemptions, which has an opposing effect but then they increased the child tax credit which is good.  With so many changes that conflict with one another, it will take some time to determine exactly who will benefit from this tax bill. For better or worse, in 2025 all of the individual tax changes expire.

What HCR97 aims to do is modify HR1 to include, among other things, many exact provisions sought with HR3708.

In a nutshell, the most relevant provision states:

“For transactions occurring after December 31, 2017, gross income (aka taxable income) shall not include gains from the sale or exchange of virtual currency for transactions under $600 for other than cash or cash equivalents.”

Note the use of the language “other than cash or cash equivalents.”  To me, this indicates that a transaction on an exchange where you sell Bitcoin for USD would be a taxable event for any amount including those under $600.  Personally, that is a little disappointing to me and not the way I understood it to be in my previous column.  I had expected the language to include an exemption for an exchange of crypto for cash up to $600.  No such luck.

What about an exchange of cryptocurrency for cryptocurrency?  The bill includes this language:

(c) VIRTUAL CURRENCY.—For purposes of this section, the term ‘virtual currency’ means a digital representation of value that is used as a medium of exchange and is not otherwise currency under section 988.  

Section 988 of the Internal Revenue Code refers to Foreign Currency transactions, so this seems to be an indication that they will not consider cryptocurrency to be cash or a cash equivalent (either foreign or domestic) for the purposes of this bill.  I am hopeful this means the greenlight will be on to make sub $600 exchanges of crypto for crypto without there being any tax impact.  Currently there is no clear guidance on this and some (not me or most other tax professionals) believe that exchanging crypto for crypto qualifies as a 1031 or like-kind exchange.  There are many reasons why this doesn’t make sense including the IRS stance that many other forms of property including gold, silver and other properties are explicitly disqualified fromm like-kind exchange status.

The consensus is that, under current IRS treatment, if we make an exchange of Bitcoin for Litecoin today, we are deemed to have sold the Bitcoin for Fiat/USD, triggering a taxable gain or loss depending upon the basis, and then subsequently to have purchased the Litecoin with Fiat/USD – even though that is not the reality of what happened.

This bill would give us a little wiggle room to avoid taxes on the exchange of one crypto for another.  For me, in 2017, I will have numerous small transactions to report where I traded Bitcoin for several altcoins.  If this legislation had been in place, I would have to report nothing.  Yeah, I’m a really small time trader.  Don’t laugh at me.

HCR97 also contains an aggregation rule which disallows a “series of related transactions” from being exempted.  It is hard to say how they will identify “related transactions” but I think it is safe to say that if you talk the dealership into letting you pay for that Lambo by making 350+ transfers of $599.99 each to their wallet hoping each individual transaction will be exempted, you will likely be in for a rude awakening come tax time.

Promisingly, the bill does provide for an increase in the exemption amount periodically by way of a cost of living adjustment from a base year of 2017.  This could turn out to be especially critical if the true converts are right and the value of USD begins to implode.

Of course, while the tax overhaul that started as HR1 has passed and is now officially law, this concurrent resolution has only just been introduced and must yet be agreed upon by the House and Senate and signed by the President in order to be added to the law.  It is not everything we had hoped for, but it is a step in the right direction in terms of establishing a more tax friendly environment for the crypto space.

Keep an eye out in the next day or two for my follow-up column on Senate Bill S1241.  And if you have other interpretations of the proposed language of HCR97, or run into opposing viewpoints elsewhere about its implications, please comment and provide links where possible.  Between the complexities of cryptocurrency and the sausage-making process of legislating, we need to keep as many eyes on this Congress as possible.

As usual, feel free to subscribe by providing your email for updates whenever I publish a new column and if you have found anything I have published of value, please consider a donation to the Crypto Tax Center by clicking here: Support The Crypto Tax Center

© Michael L. Collins


‘Twas the night before Christmas…

‘Twas the night before Christmas and all through the city

     Not a creature was stirring ‘cept one crypto kitty

My stocking was hung by the chimney with care

     In hopes that a Trezor soon would be there

Investors were nestled all snug in their beds

     While visions of Lambos danced in their heads.

With price fluctuations on coin market cap

     I had struggled with FOMO and FUD and such crap

When out on the web there arose such a clatter

     I sprang to my desk to see what was the matter.

I double clicked Chrome with default startup pages

     Of Bad Crypto, the Twitter and fifteen exchanges

The charts indicated a newly formed pop

     And it looked like we’d bounce from that 30 point drop

When what to my wondering eyes should appear

     But a tweet in the ether from someone so dear.

With an image attachment and facial blurred mostly

     I knew right away that it must be Satoshi

“Now Litecoin, Now Ether, Iota and Dash

     On Neo and Gas, even you poor Bcash.”

“From the dark web exchanges, Coinbase and GDAX

     To the IRS lawsuits subpoenas and tax.”

“From Papa John’s pizza all the way to the moon

     You all will be riding the rocket ship soon.”

“You thought me all dead but I’ve played arbitrage

     I now have three Lambos in my eight car garage.”

“So listen up closely, I bring you a toast

     With advice what to do that will earn you the most.”

“And I heard him exclaim as he turned up a bottle

     Merry Crypto to all and to all you must HODL!”


Hope you enjoyed this light-hearted Christmas post.  I’ll be back next week with more cryptocurrency tax advice columns on  www.thecryptotaxcenter.com

Merry Christmas!

© Michael L. Collins

The Tax Man Cometh (to an exchange near you, soon)

The approaching end of 2017 gives us a lot to reflect back on.

Bitcoin climbed from under $1K to well over $14K (as of the writing of this column).  In conjunction, Bitcoin’s corresponding market capitalization climbed from $15.5 billion to over $244 billion.  And to hear many tell it, this phenomenal growth is just the start.

In less than 24 hours, the Cboe Global Markets, Inc. will begin offering futures trading in Bitcoin followed a week later by the Chicago Mercantile Exchange and a promise of the same by NASDAQ further down the road in 2018.  Despite the tendency of the cryptocurrency community to shirk the “establishment,” this big step toward legitimization of the currency will almost certainly lead to even more rapid adoption by more traditional investors looking to get in on the profits of trading in the crypto environment.

On a side note, if you are concerned about institutional traders trying to drive down the price of Bitcoin through futures trading, here is my limited understanding:  No one trading in futures is actually buying or selling an actual bitcoin.  They are trading on price projections.  Think of it like Fantasy Football.  Lots of real players are actually playing professional football and making millions out there.  You and I play fantasy football and bet that the players we pick will have the game of their life.  We hope the players we don’t pick will come down with a season-ending injury so we can finally shut up that loudmouth, Todd, who has won the last three years and flaunts it like he is on the cover of GQ or something.  Jerk.

Suffice it so say that these futures traders are simply betting on the future price of Bitcoin one direction or another.  The actual buyers and sellers of Bitcoin (me & you) will still set the price based on our demand of the scarce product.  I think the two most important words there are “demand” and “scarce.”  High demand coupled with scarcity will continue to drive the price up.  Since by its very design, Bitcoin’s scarcity cannot be alleviated, the only variable in this equation is the demand.

Anyway, a concern I have seen mentioned repeatedly is that institutional money will flood into the market and short bitcoin to drive the price down in an attempt to de-legitimize or even crash the market (or maybe just find a better entry point for a long position).  I personally do not think this is very likely for this simple fact:  Futures trading will have to maintain some level of equilibrium simply because for every trader betting that Bitcoin’s price will crash by way of a short sale, another trader must be betting that Bitcoin’s price will rise by taking a long position.  A short sell cannot exist unless a long position exists to borrow from.

Again, I’m no expert on that topic but I have used that logic to reassure myself that I should continue to HODL.

So what else have we seen in 2017?  Oh yeah, the IRS, as I predicted in my column What are the tax implications of investing in Bitcoin and other cryptocurrencies? (United States Tax Code), won its first battle to force Coinbase to disclose investors with more than $20,000 in transactions or transfers to or from Coinbase during the period from 2013 to 2015.  The IRS has even vaguely promised to work even harder to make life difficult for anyone avoiding reporting and paying their capital gains taxes , and frankly, I am comfortable predicting they will continue to win.

The ruling was not entirely a loss, however.  The modification of the original IRS subpoena setting the floor at $20,000 could indicate that the idea of exempting a certain dollar volume of transactions from capital gains tax is taking hold even with the IRS.  See my column, What is The Cryptocurrency Tax Fairness Act of 2017 and how could it affect my Bitcoin transactions? for more details regarding pending legislation on that topic.

As for me, without any advice from my friends or colleagues, I have taken a long, HODLing position in Bitcoin and numerous other cryptocurrencies this year.  Needless to say, I am feeling pretty big for my britches as I continue to watch the charts along with the rest of you.

The reason I had no advice from friends or colleagues is because, as a CPA, none of my friends or colleagues have a clue what Bitcoin is.


In my profession, we are required to maintain what is referred to as Continuing Professional Education.  The amount varies from state to state, but my state requires 80 hours every two years.  Earlier this summer, I attended a week of continuing education focused on taxation, and the only Bitcoin reference was during a seminar highlighting how criminals might perpetrate a fraud or crime online. Not one CPA in the room had ever filed a tax return for a client reporting earnings from Bitcoin, and everyone seemed to share the perception that anyone using Bitcoin must be a criminal.  I was afraid to even admit owning Bitcoin lest I fall under suspicion.  Perhaps after a few clients come to them and say, “I need to report my Bitcoin earnings and/or trades this year,” their eyes would be opened to the vast possibilities beyond buying illegal drugs and fake identities.

Based on past and present actions of the IRS, taxation will occur one way or another, so prudent investors who value their freedom will report now rather than letting penalties and interest compound for failing to report over the years.  In fact, those with over $20,000 in Coinbase transactions between 2013 and 2015 should probably get in touch with their accountant and start working on filing amended returns.  The sooner the better since penalties and interest start accruing from when the return should have been filed not from the moment of discovery.

Mass adoption will equate to higher demand and increased gains for you and me and all others currently in the crypto markets, but I truly believe it will only come once people start actually reporting their earnings on this stuff and the IRS gets their feathers unruffled.  While I completely agree that taxes stink profusely, I also believe that any action taken by the IRS to secure unreported taxes, in its own unique way, continues to push cryptocurrencies towards further legitimization.  Unfortunately, their current, very aggressive and adversarial approach to tracking down who has not reported and paid taxes on their crypto is literally going to ruin the lives of some people who are unluckily chosen as examples.

Right now, over 14,000 customers on Coinbase are probably feeling pretty nervous while the rest of us sit by and watch with consternation and sympathy.  They should be nervous.  We all should, for the tax man cometh, pale horse or not.

© Michael L. Collins

Be sure to check my blog The Crypto Tax Center for my previous columns on the tax effects of mining, how to shelter your crypto gains from taxes using IRAs and more.  Sign up for email notices and of course, if you feel like supporting The Crypto Tax Center, you can donate here.

How to tax shelter gains on crypto currencies through a Self-Directed Roth IRA.

If you have not already, I recommend reading my Previous Columns on the topic of cryptocurrencies and taxes, as this column builds upon foundations established previously.

I like little better than the phrase “tax-deferred” or, even better, “tax-free.”  That is why I am so excited to help you seriously consider whether you should open a self-directed Roth IRA to shelter your cryptocurrency profits from capital gains taxes and income taxes.  Before we get to that, let’s talk a little about IRAs in general though.

When it comes to IRAs there are two main types that an individual can open:  A traditional IRA or a Roth IRA.

Traditional IRAs, as we know them today, were established by dear Uncle Sam in 1974 as a way to offer individual tax payers the opportunity to take control of their own retirement.  As corporate-managed, defined-benefit pension plans began to fail miserably, many retired people and others near retirement discovered their promised retirement benefits were missing in action due to poorly managed pension funds (I’m looking at you, American Airlines).  As a result, IRAs became wildly popular.

The appeal of a traditional IRA is that a taxpayer can make investments into the IRA and defer the tax not only on the invested portion but also on any interest, dividends, or capital gains earned on that investment.  Upon reaching retirement age, the taxpayer can start taking distributions, which are then taxable at the taxpayer’s current tax rate.

For example, let’s say you earned $55,000 last year and put $5,000 into an IRA.  In the simplest terms possible, the IRS allows you to say you only earned $50,000, and you have successfully deferred the taxes on the $5,000 investment – good for you.  Now, let’s say you invested all of that $5,000 in Tesla through your IRA because, let’s be honest, that new Roadster is pretty freaking awesome (0-60 in 1.9 seconds – seriously?). Tesla, of course, does amazingly well because why would anyone spend a half a million dollars on a Lambo when you can get a faster car from Tesla for $200,000.  So when you reach retirement age in 30 years, that $5,000 investment is now worth $150,000.  You begin taking distributions on that $150,000, and as you withdraw, it becomes taxable income to you.  If you take $10,000 out, your taxable income is increased by $10,000 in the year distributed.

This all sounds pretty good, huh?

Well, there was one drawback.  Typically, a taxpayer’s income increases over time and the taxpayer climbs into higher tax brackets with age.  It is entirely possible, then, that one might defer taxes of 15% or 25% upon investing the money, only to be taxed upon withdrawal in a 40% tax bracket, so paying higher taxes on the distributions.

That may not be true for everyone but you, my friend, are a crypto investor and, by many accounts, destined to be a gazillionaire, so the odds are, you will be in a higher tax bracket someday when you start taking disbursements.

Wouldn’t it be cool if you could just go ahead and pay your 15-25% tax on the $5,000 before putting it into your IRA and then take the distributions upon retirement age tax-free?  Well, you can.  That is the Roth IRA, and although there are lots of complexities as to how much you can contribute annually (imagine a deep baritone voice in the background saying, “consult your local tax professional” as you read this sentence), it really is that simple.  You pay the tax up front on the investment and get all the earnings on it tax free as retirement distributions.  So, in the example we used above, you actually report all $55,000 of your earnings as taxable income and the $5,000 you put into your Roth IRA can grow exponentially with all related interest, dividends, and capital gains sheltered from any additional taxes upon distribution at retirement age.

In my opinion, there is simply no other way to go between the two options but to take the Roth IRA.  It is truly a piece of legislation that offers an incredible long-term tax benefit to thrifty taxpayers.

You have repeatedly heard me refer to retirement age in relation to distributions from each of these IRA’s.  Of note, though, you can take early distributions from either form of IRA, and that actually becomes an important point as we begin to talk about our ultimate goal of sheltering our crypto gains.  Early distributions are any withdrawals taken from an IRA before the taxpayer reaches age 59 ½ and are subject to a 10% early withdrawal penalty and, in the case of the traditional IRA, taxes on the distribution as well.  Some situations permit an early withdrawal without tax or penalty (like a first time home purchase), while other circumstances might incur tax liability on an early distribution even from a Roth.  The rules are very complex and beyond the scope of what we are trying to accomplish here – refer back to the previously mentioned baritone voice.

By now, you may be starting to recognize why a Roth IRA might be a good tool for holding cryptocurrency investments.  You pay tax on the investment, and later, when the crypto goes to the moon, you can take it out tax-free with, at worst, only a 10% penalty if you withdraw before age 59 ½.  That is a lot cheaper than paying either long-term or short-term capital gains taxes on assets held by you personally.

The challenge becomes how to get the desired cryptocurrency into your personal Roth IRA.

Here, the “self-directed” component comes into play.  Most IRAs today are self-managed but custodian held.  “Custodian held” means a third party such as T Rowe Price, Fidelity, Vanguard, TD Ameritrade, or some other investment firm or brokerage is the custodian of your assets, and you send your fiat currency to them to fund your IRA.  “Self-managed” means that you get to choose from the investment options they offer, but nothing else.  With T Rowe Price for example, you may have decent variety but still be limited to only funds they manage.  TD Ameritrade offers a wider selection including pretty much any stock, plus a variety of bonds and other securities as well but you can’t buy gold or cryptocurrency, for example.

Self-directed IRA’s give you more flexibility in that you can expand your investments beyond those approved by a custodian to encompass a much wider range of options including real estate, precious metals and now, thanks to the IRS declaring that virtual currencies are property (see my previous column What is The Cryptocurrency Tax Fairness Act of 2017 and how could it affect my Bitcoin transactions?), even Bitcoin and other cryptocurrencies.

Setting up a self-directed IRA can seem somewhat daunting, however.  The easiest route is to open an account with a self-directed IRA custodian.  As previously, you still send the investment to the custodian, but instead of being limited to a small handpicked list of investments, you can direct them to purchase whatever IRS-approved asset you desire.  The drawback on this type of self-directed IRA is that custodial fees can get expensive.

A more challenging route is to establish a Limited Liability Company (LLC) that will house the investments. The LLC which is held (or owned) by members, has one lone member, the IRA, which is a separate legal entity from you, the investor.  But, while the IRA “owns” the LLC, you manage it and direct the investment selections.  This type of self-directed IRA is often referred to as a “checkbook control IRA” because you literally control the checkbook.  The drawback here is up-front legal fees, plus it is easy to make a mistake that could void the tax-advantaged status of the IRA putting you in a precarious spot with Uncle Sam.   Maintaining a clear divide between you the taxpayer and the IRA is critical.  Again… baritone voice guy.

No matter which route you take, it is extremely important to understand that you should seek the advice of your personal tax professional in advance.  Any misstep along the way can result in lot of dollars spent without accomplishing your ultimate goal of sheltering the gains on your crypto from taxes.

If you successfully establish a Self-Directed Roth IRA, purchase only one bitcoin through it and it does eventually reach a million dollars as so many predict, these steps could literally save you hundreds of thousands of dollars in taxes.

I will follow up soon with some recommendations on reputable companies that can help you establish a self-directed Roth IRA.

© Michael L. Collins

Mining for cryptocurrencies and why the IRS may owe you a refund.

Perhaps you have dropped a couple of thousand dollars on a new mining rig and you have it churning away, performing blockchain confirmations for Bitcoin or some other altcoin.  The coins started accumulating and you began to feel like an evil super genius, laughing maniacally as thoughts of Lambos danced in your head.  Then, the post-mining electric bill arrived and it all came crashing down around you as you realized that all those fans whirring 24/7 were actually consuming a significant amount of electricity and the local utility monopoly now wants their share of the take.

Suddenly, that Lambo doesn’t look quite so attainable.

Well, take heart, my friends, because I am going to share some resources to help you determine how you can profitably mine for cryptocurrencies and, more importantly, show you how you can get the IRS to help you subsidize those utility bills and the mining rig through a tax break.  For a while, at least.

Picking a mining rig

To start with, an excellent resource I would recommend if you are interested in mining is www.cyrptocompare.com.  They give detailed analysis on the cost of various graphics cards and mining rigs with a breakdown of the payback period for each piece of equipment, reflected based on the current prices for equipment as well as the current value of the desired coin you might wish to mine.

I will offer one word of caution.  In some cases, they reflect the payback period on just the costs of a graphics card (the Nvida Geforce GTX 970 listed at $520 with an 1,836 day payback period mining Ethereum as of the publication of this column, for example) and in others, they reflect the payback period on the total cost of a mining rig (the ETH Mining Rig Ambition 1070 listed at $43,900 with a payback period of 9,112 days also mining Ethereum) so you don’t necessarily get a true apples to apples comparison in some cases.

With all of these breakdowns, there are even a few losers that currently could never sustain a profit and would only ever generate a loss.  “Why list them then?” you might ask.  Well, it is important to keep in mind that there are a lot of moving parts to these calculations so if one variable changes (i.e., price of the equipment drops or the price of Ethereum skyrockets), the payback period could change significantly and a processor that currently can’t turn a profit may suddenly be able to – especially if the cost of the mined coin rises.  Also, there is the very real possibility that the coin you mine today will be worth far more than today’s prices in the future making the whole process worthwhile after all.  Cryptocompare.com explicitly states what the values are for the estimates they are making – even the estimated kWh per hour cost of utilities.  Further, if you have your own configuration and data, they have a nifty little calculator where you can plug in your own variables.  I find it to be an excellent resource for anyone considering mining.

Now the fun part… Taxes

So you have made your selection and dropped some cash on your desired mining equipment.  What now?  Now you make the tax man help you get started by taking advantage of the various legal deductions you can take for your mining operation.

The key to taking advantage of every opportunity the IRS presents you is fairly straightforward.  Treat mining like a business.

If you have never owned a business before, this can sound pretty scary, but it really isn’t.  You don’t have to get a federal ID number to start.  It can all flow under your social security number and be filed on what is referred to as a Schedule C.  That is simply the portion of a tax return where a sole proprietor reports business income and losses.  So congratulations, you are now a sole proprietor!  Not quite as glamorous sounding as Lone Wanderer for all of you Fallout fans but it still has a nice ring to it.

For purposes of this scenario, I am going to use the Nvidia Geforce GTX 970 simply because that is what I am running in my rig so it is a real world scenario for me.

So based on cryptocompare.com, I will be able to mine $255.83 per year in Ethereum using my machine.  Actually they reflect $103.41, which is net of the estimated electrical costs of $152.42 but let’s hold off on all of the expenses for now.   If you take no deductions on the $255.83 and fall into the most common tax bracket, you will owe 25% of your mining profits in taxes.  That’s about $64 bucks you would owe the IRS.  But we are not going to pay any taxes on this income.

Side note: If you have read my previous columns, you may be asking, “what if I hodl and don’t sell the mined coins?”  Well, again, the IRS does not currently provide clear guidance on that other than to say cryptocurrencies are property.  I believe from the IRS perspective, you will be deemed to have sold the mined coins for their current market value.  If you, in fact, hold them for investment, you have converted them from business income to investment property and they will take the basis for the same exact amount you reported as income.  So if you mine one Ethereum which lists at $270, then you are deemed to have sold it for $270 in USD and have “earned” that amount in revenue.  If, in fact, you hold it, it is as if you immediately bought it back for $270.  If you then later sell it for $250, you will actually have a capital loss.  See my previous column for more clarification on the impact of long-term and short-term capital gains.

So back on point, we have $255.83 in taxable business income.  Now it is time to start chipping away at it.

First, let’s take the layup, $152.42 in increased utility costs as estimated by cryptocompare.com.  Your costs will actually be slightly higher than that because you don’t just plug a GPU into the wall.  You need all the parts and pieces, motherboard, CPU etc.  Review them in part or whole to determine the estimated kWh costs and plug it into the calculators at cryptocompare.com for a better estimate.  Also, document this!  That will be important if the tax man ever cometh riding in on a black steed with sickle in hand to dig through your underwear drawer.

Deducting the utilities puts us at a net income of $103.41.

The next deduction is the cost of the computer itself.  This is going to be your biggest expenditure.  With a GTX970, it is not unreasonable to assume you will spend another $1,000 to have a suitable rig so let’s say your startup cost for that is $1,500 just to keep things clean.

You can’t actually take the full cost in the first year though.  Long-lived assets have to be depreciated (expensed over multiple years).  I, and probably most other conservative CPA’s, would probably call it 5-year property but I could almost argue that with the rapid changes in technology and the fierce competition out there for mining, it might have a useful life of only 3 years.  For this example, let’s stick with 5 years.

The IRS utilizes Accelerated Cost Recovery methods to calculate depreciation which is actually good for us, allowing us to deduct a larger portion in early years.  In this case, we are using what they call the Double Declining Balance Method (also known as the 200% Declining Balance Method) which means we divide the asset cost by its useful life, so $1,500 divided by 5 years gives us $300.  Then we double the result giving us $600 which is the portion we can deduct in year one.  That will leave $900 for us to deduct in future years.

Also, there are other rules which allow you to take a larger portion of the asset in year one that are commonly known as Section 179 deductions but for this example, it is unnecessary.  If you want to read more about Section 179, click here.

So, if we do a little more number crunching, we take $103.41 less our $600 in depreciation and suddenly we have a beautiful business tax loss. -$496.59 to be exact.

We have now generated a tax loss that can be used to actually reduce taxable income you might have in another category – from your W-2 or other business income, for example.  But we’re not done yet.

Now, think about where you have that rig sitting, clicking and whirring 24 hours a day, performing a valid business function for you but taking up personal space in your beloved resdience.  This is my favorite deduction which the IRS refers to as “Business Use of Home.”  This can be a tiny number or a relatively decent number depending upon a number of factors.  The first thing is to make sure you have a designated space for your mining business.  It could be as large as an office completely dedicated to mining or as small as a small desk or stand to hold the PC.  The calculation to determine how much of a deduction you can take is based upon the ratio of square footage used for the business to the square footage of the home or apartment.  Then take that ratio against the number of hours of use per day.  Although 24/7 business use is rarely allowed in a home, this rig is running 24 hours a day so you get 100% of the square footage ratio in my opinion.  Next you take that percentage against either the rent paid or the mortgage interest you are paying on the home.  You can actually use a portion of your mortgage interest as a business deduction which is better than simply taking it as an itemized deduction if you have gone that route previously.  Whatever portion you can’t use for the business deduction can still be taken as an itemized deduction though.  This typically isn’t a gigantic amount, but every penny helps.

For simplicity’s sake, let’s say it calculates out to $20.  Now you have a business tax loss of -$516.59 which can be used to directly reduce your otherwise taxable income… dollar for dollar.

That scenario is actually a pretty conservative estimate if you are serious about mining and sink some significant money into it.  If you are going that route or just tinkering around for fun, I strongly encourage you to seek the advice of a qualified tax professional which, by the way, can also be taken as a tax deduction.


An important thing to note is that you should actually strive to make a profit within a few years.  This is important because if you continue to lose money after three or four years, it is entirely possible that the IRS will deem your little mining project to be a hobby and no longer allow you to use the business loss to offset other taxable income.  If you later turn it into a profit-making venture, they will be happy to forcibly reinstate it as a business and collect taxes on your profits.  Seriously they will do that.

Don’t worry though, you have done your due diligence and documented thorough research at cryptocomparison.com that you have the equipment to eventually turn a profit, which frees you up to shamelessly take your business loss this year and reduce your tax burden.  Good for you.

Now go out there and mine some crypto!

Finally, if you didn’t TL;DR me, I probably saved you honest tax payers a bunch of money.  Now send me a Satoshi or two by clicking here and go impress you tax preparer with your newfound knowledge.  Also, view an important disclaimer here.

© Michael L. Collins

What is The Cryptocurrency Tax Fairness Act of 2017 and how could it affect my Bitcoin transactions?

October 13, 2017 by: Michael Collins

So maybe you own some Bitcoin but, like my 6 year old with tooth fairy money, it’s burning a hole in your pocket. Maybe you are eyeballing a new video card for that mining rig to capture some more NEO and get GAS from newegg.com or you might just be picking up a much-needed microvelvet lounger for the pooch at overstock.com.  The good news is you can pay for all of this with just a little bit of Bitcoin.

Well, under today’s rules, those purchases result in a capital gains (or loss if your timing is as bad as mine).  That is because the IRS currently identifies Bitcoin as property.  They laid the groundwork for this treatment in Notice 2014-21 (click here to read n-14-21), which I personally believe was rushed just to get something out there as cryptocurrencies began growing exponentially in popularity and there was no previous guidance as to the tax treatment.

Our friends in the U.K. have a little more breathing room than we do here in the U.S.  While the IRS equivalent in the U.K. identifies Bitcoin and other cryptos similarly, as property, they also give each tax payer an exemption of £11,100 (around $14,000 US dollars) so that those spending it like cash don’t get hammered with capital gains taxes.  They actually have capital gains taxes there too – even spelled the same but read it in your best John Oliver voice for the most accurate pronunciation.

Here in the US, we currently have no exemption so every single Satoshi of Bitcoin you spend is treated like a property sale and subject to either long-term (hopefully) or short-term (not hopefully) capital gains taxes depending upon how long you held it (or, better yet,  how you identified it – which I will explain in a future column).  Every single transaction.  Even the .000213 BTC fee on an exchange of two other coins.  In the stock exchange world, transaction fees can simply be added as part of the cost of the transaction and get added to the basis.  In the crypto world, the fee itself is its very own transaction, treated from the current IRS perspective as a unique sale of property on its own. Note to self – if an exchange will accept USD for transaction fees, pay it with that and just add the fees in as part of the basis of the acquired coin.  That would also save a lot of cost on these exchanges that are slow to adjust the crypto rate as the value of the coin increase against the U.S. dollar.  More about that in a later column too.

With all of this incredible hassle to just spend Bitcoin in the United States, how will it ever truly catch on and be perceived widely as a viable alternative currency, rather than a black market of criminals who aren’t paying taxes anyway?

Enter our heroes, Representative Jared Polis, D-Colo., and Representative David Schweikert, R-Ariz., who serve as chairmen of the Congressional Blockchain Caucus.  In recognition of the challenges faced in its growing adoption, the Caucus was formed during the 114th Congress in February of 2017 to educate and inform policymakers on blockchain technology and help the United States remain competitive in the international arena.

Polis and Schweikert introduced The Cryptocurrency Tax Fairness Act of 2017, which by its very name and the fact that they belong to different parties, suggests bipartisan understanding of the dozens of complaints generated by my last column that paying capital gains taxes on every single transaction is just “not fair.”  I could use other quotes besides “not fair” but I’m trying to avoid an R- rating.

As the IRS strong-arms exchanges into revealing the potentially unreported, tax-consequential activities of their customers, Polis and Schweikert seem to have taken the stance that at least part of the blame for low self-reporting falls on the IRS for providing only vague guidance for taxpayers and preparers about the tax treatment of something with hybrid-like characteristics such as cryptocurrencies.

Prior to the introduction of The Cryptocurrency Tax Fairness Act of 2017 in September, Polis and Schweikert sent a letter to the Commissioner of the Internal Revenue Service, John Koskinen, requesting that the IRS “clarif[y] how to properly tax these forms of transactions.”  Polis expanded by saying, “I look forward to hearing from Commissioner Koskinen and receiving clear-cut guidance for how digital currency users report their taxable income.”

The opinion of Polis and Schweikert seems clear that buying a soda from a Bitcoin-friendly vending machine should not trigger a capital gains tax situation and that eliminating capital gains taxes on at least some of the day-to-day transactions is exactly what they hope to accomplish.   Like in the UK, the Act would exempt transactions under a certain amount from triggering a taxable capital gain.  Unlike in the UK, the exemption is not $14,000 US, only $600.  That is not anywhere close to where I would like see it, and this Act still has a long way to go before it becomes reality, but it is a huge step in the right direction as recognition of the legitimacy of cryptocurrencies in the United State continues to gain ground.

If you would like to receive updates to new topics addressed by the Crypto Tax Corner, be sure to follow us and consider supporting future content with a small donation by clicking here: Donate to the Crypto Tax Center.

© Michael L. Collins

This is not your fathers coin collection.

Well, I have picked up a new hobby:  Coin collecting.

It might not be exactly what you think, though. Sure, I have the state quarter sets tucked away for my grandkids someday and a nearly complete wheat penny collection minus a few of the rarest, such as the particularly elusive 1943-S copper Lincoln wheat penny, one of which sold at an auction in 2012 for a cool one million dollars.

Yeah, I will never be completing that set.

The coins I am currently collecting are considerably less tangible:  Bitcoins.

Bitcoin is the most well-known of hundreds (maybe thousands) of cybercurrencies created in the last decade, also called cryptocurrencies.

I first learned about Bitcoin in a Forbes magazine article back in 2013 which detailed how Bitcoin became legitimate currency when someone bought two pizzas for 10,000 Bitcoins in 2010. At the time, they pretty much got the pizzas for free because Bitcoin was considered worthless.

Before that transaction, Bitcoin had been some kind of thought experiment turned cyber-trinket via programming – I don’t fully understand.  But I do know it is dispersed as a reward for people willing to use their computers for a new kind of processing called block chain technology.  I don’t fully understand that either, but apparently this technology is changing the way companies around the world do business.

The phrase “block chain” represents the functionality of these new systems utilizing a network (or chain) of computers all over the world to perform tasks which are conducted in full view for all the world to see.  Since the systems are decentralized (i.e. not sitting in one giant server room under the control of only a few people), the information is instantly documented worldwide and cannot be copied, altered, forged or modified.  Think of it as having a million witnesses to every transaction made.  Again, I don’t get it entirely, but people who I think are pretty smart seem to get it and the logic hovers close enough to my conceptual abilities that I have become convinced there is something there.

So why would all of these people be willing to use their personal computers to participate in these block chains?  Because they get rewarded with Bitcoin…  Or Litecoin, or Etherium, or Neo, or Monero.  I could go on and on depending upon which block chain you are referring to and what digital currency gets rewarded.  They call that mining.  So if I say to you, “I am mining Bitcoin!” what I am really doing is participating in the chain of computers that are processing billions of transactions in order to get rewarded with a cybercurrency which I can then take and spend at a surprising number of locations around the world.

I am not mining for Bitcoin, though.  I am not that smart.

What blew me away was that the 10,000 Bitcoins used to pay for two pizzas in 2010 were valued at $7 million by 2013 when the Forbes article was published.  As I write this column, those same 10,000 Bitcoin today are worth $43 million.  I hope it was some seriously good pizza.

I may not fully understand block chain technology or cryptocurrencies but one thing I can do is math.  A 7-year return of $20 in pizza to $43,000,000 is the kind of growth investors only dream about.  So I started saving my lunch money and bought some Bitcoin.

Honestly, it was pretty scary.  The digital currency world is still something of a Wild West, full of hackers, liars, and cheats anxious to get their hands on your money.  But things are happening in the cryptocurrency world to push the market towards legitimacy.  With a market capitalization of close to $150 billion in cybercurrencies, legitimate, reputable and, more importantly, INSURED, exchanges are being established.

I was actually able to dip my toes in the crypto world even before investing my lunch money by following The Bad Crypto Podcast.  You can visit their website at http://badcryptopodcast.com or just listen to the podcast, which walks you gently through how it all works from offline digital wallets to two-factor authentication security.  Even better, they tell you how to set up a free account on a major U.S. exchange and give you 150 thousand free Badcoins, a cybercurrency they created so listeners could simply try out making transactions on the exchanges.  It’s fun and free and doesn’t even require a credit card or an ID to start playing with their cyber-coin, which they are clear to point out is worthless.  You can play with real, albeit worthless, coins on a real exchange.

At the end of the day, I have no idea what is going to happen with Bitcoin or cybercurrencies in general, and you certainly shouldn’t take anything in this column as a recommendation from me one way or another.  The sky could fall tomorrow or, as the hypesters say, they could all be driving Lamborghinis as prices rocket to the moon.

As for me, I’ll stick with only risking my lunch money and keeping it a hobby for now, but it sure is interesting to watch – even if I do have to bring a few slices of leftover pizza from home, which, I am thankful to say, did not cost me $43 million dollars.

© Michael L. Collins

This column appeared in the October 4th edition of The Mountain Press under the name “The wildwest of bitcoin: or how two pizzas cost $43,000,000.”

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