Cathie Wood, Founder and CEO of Ark Invest, advises investors not to sell or trade Bitcoin (BTC) until the US Internal Revenue Agency (IRS) adopts more sensible tax policies on digital assets.
On a webcast hosted by Cboe, Wood said that Transactions with BTC could lead to massive tax liabilities.
“The IRS has something to say about this. So if you make big profits on your bitcoin, I don’t think it would affect the transactions significantly until we potentially get some changes on the tax front.” Wood told Insider, according to Markets.
Using Bitcoin to transact and sell for a profit have become attractive options for long-term owners. The flagship cryptocurrency recently surged above $ 61,000 on its way to new all-time highs. And although the price of BTC has corrected drastically since its most recent peak, it’s still down 80% from last year.
Bitcoin holders in the US can now too Use your BTC to buy Tesla cars. At current values, a base Tesla Model 3 could be bought for around 0.72 BTC.
Whether you are selling Bitcoin for a profit or using it to buy a Tesla, it is considered a taxable event, at least in the US. That’s because The IRS treats Bitcoin as property rather than currency. Until that changes, it may not be intuitive to conduct transactions in the cryptocurrency.
Although Wood’s comments were aimed specifically at high earners, The vast majority of buyers have made money from their Bitcoin. Until November 2020 it was appreciated that around 98% of BTC addresses were black.
Fortunately, Bitcoin investors who are making large unrealized profits don’t have to sell their coins to take advantage of their profits. Platforms like BlockFi allow users to borrow fiat money on their BTC holdings and pay it back over time. This means that users never make capital gains and don’t have to give up their bitcoin to access cash liquidity.