Levying a progressive tax on the ultra-wealthy has been a talking point long popular with many United States Democrats, yet such a policy would have been unimaginable under a Republican administration and a split Congress.
Now that the Democratic Party is back in control of both the White House and Capitol Hill, the initiative is formally on the table: On March 1, a group of Democratic lawmakers led by Sen. Elizabeth Warren introduced legislation proposing an annual tax on the households and trusts worth more than $50 million, including the value of property such as real estate and stocks.
As new bridges between traditional capital and the digital asset space emerge almost daily, highnet-worth individuals can move value to crypto with more ease than ever before. Can a prospective wealth tax, should it be codified in law, affect their willingness to do so?
Marketed as The Ultra-Millionaire Tax, Senator Warren’s bill proposes a 2% annual tax on the net worth of any household between $50 million and $1 billion, and a 3% tax for those worth more than $1 billion. The framers contend that the burden will only fall on the wealthiest 100,000 households in the nation, or the top 0.05% of wealth distribution.
The lawmakers argue that the initiative could bring in at least $3 trillion in federal revenue over 10 years — a pool of resources that could be directed to support underfunded areas such as education, childcare and infrastructure.
The proposed legislation would have to clear the U.S. Senate before it becomes law. Even though Democrats and Republicans are currently tied 50-50 in the chamber, with the Democratic Vice President Kamala Harris holding a tie-breaking vote, most bills still take at least 60 votes for approval. As Bloomberg noted, Democrats are at least hoping to append some elements of the tax to the budget bill that will be reconciled later in the year.
It doesn’t come as unexpected that the initiative received immediate scolding from the political right and center, along with big business circles. In the weeks after the proposal went public, the Wall Street Journal ran several op-eds unpacking the reasons why the wealth tax would bring more harm than good.
One argued that a wealth tax for American millionaires and billionaires would affect the ownership landscape in the U.S. stock market: As big U.S. investors would be pressured to sell their most liquid assets at a discount, their counterparts from wealth tax-free jurisdictions would be happy to buy in. The author of another contended that the outflow of capital from the stock market resulting from taxation of the ultra-wealthy would diminish the value of everyone’s savings.
Billionaire Leon Cooperman told CNBC that while he believes that rich people should pay more taxes, Warren’s configuration of the policy “has no merit.” He added: “If the wealth tax passes, go out and buy yourself some gold because people are going to rush to find ways of hiding their wealth.”
Wait, but could that gold be digital?
Not a place to hide
Granted, Cooperman’s quip about using gold to hide one’s net worth is metaphorical, a reference to the kinds of assets that can be less visible to the government’s eye compared to those sitting in bank and brokerage accounts. As for the actual gold, the IRS treats precious metals as collectibles subject to long-term capital gains tax. Cryptocurrencies definitely do not belong in either of these categories, as they are neither collectibles (unless they are nonfungible tokens) nor less visible.
If the goal is literally to conceal the wealth, resorting to a store of value that is automatically tracked on an open, immutable ledger doesn’t sound like a good idea. Maria Stankevich, chief business development officer at cryptocurrency exchange EXMO UK, commented to Cointelegraph: “Today massive BTC adoption is tightly connected not to the shadow money, but quite to the opposite — to its status of the transparent financial asset.” Tim Byun, global government relations officer at crypto exchange OKCoin, added:
“Taxing the ultra-wealthy has little or no impact on the surging adoption among all Americans and non-Americans into digital assets, specifically Bitcoin. […] It’s foolish to think that they (as well as anyone) will look to Bitcoin as a way to ‘hide’ their wealth given that bitcoin leaves a permanent digital footprint.”
Douglas Borthwick, chief marketing officer at digital asset firm INX, said that viewing digital assets and Bitcoin (BTC) as a place to hide wealth is “rather off-base.” While U.S. tax residents can still buy Bitcoin on offshore platforms without rigorous Know Your Customer and Anti-Money Laundering requirements in place, there are serious risks associated with delivery and custody. According to Borthwick, millionaires typically resort to other strategies:
“They invest in high-ticket items to guard against inflationary purchases. Think of Masters’ paintings and parcels of real estate. There are many strategies that ultra-wealthy investors employ with their accountants to avoid more significant taxes. I’m not sure that digital assets would lead the charge there.”
OKCoin’s Buyn opined that the ultra-rich will continue to preserve their wealth “through tried and true means as they have access to the brightest lawyers, financial advisors and consultants.”
An indirect effect?
Even if digital assets are no good for concealing households’ actual net worth, there could be other avenues for a hypothetical wealth tax to heighten millionaires’ interest in crypto. Here’s one.
According to a January report by the tax policy nonprofit Tax Foundation, a wealth tax of 2% to 3% could erase interest earnings on safer investments like bonds and bank deposits. This could become enough of an external shock to make wealthy investors reconsider their portfolios’ structure and recalibrate them so as to give more weight to the more risky yet higher-yield assets.
In other words, the hypothetical tax could embolden the rich to invest in cryptocurrencies and crypto derivatives to offset the stagnating gains from the more traditional assets.
Bitcoin to Ethereum rotation is changing ROI on traders’ portfolios: Understand the impact
Is it likely that one of the factors driving Bitcoin’s price plunge is the rotation of investment from Bitcoin to Ethereum? Looking at the following chart with ETH and BTC percent balances across exchanges, it is likely. The rotation from BTC to ETH continues in light of rapidly changing dynamics in the current bull run.
This is different from the trends observed in the past, as per the above chart, BTC and ETH percent balance on exchanges were dropping consistently, driving the prices of both assets higher since the beginning of 2021. However, a shift in trader sentiment and the changing correlation between the two assets has led to a shift in trend since the third week of April 2021. Currently, the correlation between BTC and ETH is 0.9 based on data from cryptowatch.
More BTC has hit exchanges at the same time when ETH is leaving. As HODLer effort on ETH’s side increases, Bitcoin is under high selling pressure and it has increased consistently since the change in pattern. This is bullish for ETH in the short term. However, if the trend changes, ETH may see a sell-off having a negative impact on the price target for the end of 2021. The BTC ETH rotation is changing the ROI on several portfolios, as more ETH HODLers are profitable and the number of buyers, unique wallet addresses is increasing.
The number of addresses has increased consistently since 2021 and this is another bullish sign. Additionally, in the case of ETH, the concentration by large HODLers is at 41%, this has dropped, however, this could be a sign of more retail traders entering the market for ETH.
BTC’s concentration by large HODLers is 12%, the asset is nearly largely concentrated in the hands of retail traders, unlike top altcoins and ETH.
This also goes against the widely held belief among traders, that Bitcoin is concentrated in whale wallets and institutions. Additionally, ETH’s amount of supply last active 3 to 5 years (1-day moving average) has reached a 13-month low of 17 Million ETH based on data from Glassnode. The BTC ETH rotation is changing the ROI in the short and long term for HODLers.
Sign Up For Our Newsletter
BTC critic: ‘That’s even more bearish as it means that Bitcoin…’
Undoubtedly, it’s difficult to digest the fact that a single entity has the influencing power over the largest crypto asset. A similar event was observed with the ‘meme coin’ during Musk’s SNL event. It was a typical case of an over-hyped event for Dogecoin. Although Elon Musk did put forward his ‘damage control’ steps, the coin saw a drop in its price. What’s the case with bitcoin though?
Since Musk’s claims of ‘centralization’, BTC witnessed a drop in its price. One can argue that he took to Twitter to assert that Tesla had not sold any of its bitcoin. Can this help revive the asset’s price?
Elon Musk recently cleared all the rumors about Tesla dumping BTC holdings.
To clarify speculation, Tesla has not sold any Bitcoin
— Elon Musk (@elonmusk) May 17, 2021
Musk had earlier posted an obscure single-word tweet that wreaked havoc and also put forward the possibility of a ‘pump and dump‘ narrative.
— Elon Musk (@elonmusk) May 16, 2021
How did Bitcoin react?
Bitcoin indeed saw a spike in its price. It instantly regained some of its recent losses, spiking over 6 percent, after Musk’s tweet. The coin, at the time of writing, was currently trading at the $45,800 mark although it had witnessed a price correction of around 8%.
How did the community react to it?
Willy Woo a prominent crypto proponent wasn’t shy to express his frustration on the social media platform.
Damage already done. The market was already soft and tentatively recovering when your unresearched FUD on energy came out. There’s only so much that can be absorbed by the market.
— Willy Woo (@woonomic) May 17, 2021
Although renowned bitcoin critic, Peter Schiff too added his views on the incident, with an unusual twist. He stated:
“Clarification, Tesla hasn’t sold any YET. That’s even more bearish as it means that Bitcoin sold off so much without Tesla actually selling any. Imagine what will happen to the price when Tesla finally does sell!”
Sign Up For Our Newsletter
All hail the Shiba? Rise of Dogecoin pretenders fueled by meme frenzy
Shiba Inu (SHIB) has been the talk of the cryptoverse and mainstream media recently. It is a meme coin themed around the Shibu Inu dog, a Japanese dog breed that Dogecoin (DOGE) is also basing its image on. According to data from CoinMarketCap, SHIB hit its all-time high of $0.0000388 on May 10 after it surged more than 2,500% from trading at $0.00001478 on May 7.
The token has now been listed on most of the major exchanges, such as Binance, Coinbase, FTX, OKEx and even Binance’s Indian counterpart, WazirX. It had also briefly broken into the top 20 cryptocurrencies list by market capitalization. Currently, it has dropped off in the rankings, with a market cap of just over $6 billion. Earlier on May 10, SHIB’s market capitalization hit an all-time high of over $13.5 billion.
SHIB was launched in August 2020, soon after Dogecoin’s hype on TikTok sent the coin to a two-year high. According to its “Woof Paper,” a total of 1 quadrillion tokens were minted, 50% of which was locked into Uniswap with the keys thrown away. The other half, however, was sent to Ethereum co-founder Vitalik Buterin’s wallet in an uninvited fashion.
The intention behind sending 50% of the tokens to Buterin was to ensure price stability since ideally, the demand-supply dynamic wouldn’t allow the price to swing rapidly since one entity owns a large portion of the circulating supply.
However, Buterin gave away over $1 billion worth of SHIB to a coronavirus charity in India known as the India Covid Relief Fund. This led to the price of the coin crashing by over 50% almost immediately as the market began to panic.
Disclaimer: The coins described below are highly volatile and speculative in nature. This article is not an endorsement of these coins. If you opt to trade any of these coins, do so at your own risk.
Dogecoin killers out there? Maybe not just yet
According to the coin’s woofpaper, it claims to be the “Dogecoin Killer,” citing the enormous supply of the token as a differentiating factor between the two. In fact, on May 10, the demand for Shiba Inu grew so much that Binance ran out of ETH addresses since the token is based on the Ethereum blockchain.
Johnny Lyu, CEO of KuCoin — a crypto exchange — spoke with Cointelegraph about the positives of such high demand from retail investors: “It can be considered as a way to quickly learn about blockchain and the cryptocurrency industry. It provides new users with a lower threshold compared to some mainstream cryptocurrencies such as Bitcoin and Ethereum.”
As the token is competing with DOGE, it’s important to assess how it’s performing relative to Dogecoin. At the time of writing, SHIB is trading in the $0.000016 range, amounting to around 10,000% of gains in the last 30 days in comparison to around 300% gains in the same 30 days for Dogecoin, which is currently changing hands at roughly $0.50. Speaking of Dogecoin’s use cases, Lyu further elaborated:
“Dogecoin has a unique cultural symbol along with abundant application cases. For example, SpaceX announced recently that it will launch the DOGE-1 moon mission, and the cost will be paid by Dogecoin. This will allow more people to learn about and use Dogecoin along with Musk’s preference for Dogecoin.”
DOGE crashed by more than 25% following Tesla CEO’s Saturday Night Live appearance where he dropped several references to the meme token. His appearance also led to the price of Tesla dropping 14%, thus losing nearly $20 billion in market value.
However, on May 14, Musk made an announcement that he would be working with the DOGE development team to “improve system transaction efficiency.” This news led to the rebound of the token’s price from $0.38 to trading in the $0.50 range as the community envisions further adoption by brands and firms as payment options available to retail investors.
Jake Wujastyk, chief market analyst at TrendSpider — a technical analysis software company — told Cointelegraph that the DOGE price drop before SNL was not a coincidence: “This flush in price to the mid-$0.30s was conveniently timed right before this announcement by Elon Musk.” He further added:
“Dogecoin moved down to the volume shelf around $0.35 earlier in the week (an area where people who originally had profits in the $0.40s+, were back to break even). This is exactly where technical traders should have expected a bounce as supply dried up in this area (due to a lack of profits held by those that held DOGE around $0.35 originally).”
While SHIB is currently the most talked-about dog-themed meme coin apart from DOGE, there are several other highly volatile and speculative dog meme tokens that are floating around in the cryptoverse, which were launched in the hope to replicate the performance of DOGE.
One of the other coins from the same development team as SHIB is called LEASH. This coin has a limited total supply of just 107,647 tokens. Due to this low supply and the hype around the project, the sister token of Shiba Inu has seen astronomical gains of 6,500,000% since the beginning of May.
Another such coin is Kishu Inu (KISHU), a token themed around Shiba Inu’s distant relative, the Kishu. The project’s white paper speaks of a farming decentralized application in the future similar to SHIB’s upcoming ShibaSwap marketplace where users can swap the token and even earn rewards through staking. The coin is currently changing hands at $0.00000001, posting over 4,000% gains in the last 14 days.
Another coin that is trying to capture the DOGE hype is Dogelon Mars (ELON), a coin based on Elon Musk and his love for space travel. Similar to SHIB’s tokenomics, upon minting, 50% of the supply was sent to Buterin’s wallet address, and the other 50% was locked on Uniswap in a liquidity pool with an Ether (ETH) pairing. ELON is currently trading at $0.00000070 and has posted over 220% gains in the last 14 days.
It doesn’t end there. There are many more projects that are trying to imitate the financial performance of Dogecoin — UnderDog (DOG), Doge Token (DOGET), DogeFi (DOGEFI), DogeSwap (DOGES), PAW Token and ShibaCorgi Token, to name a few. In fact, there is now even a CAT token, which was launched by Netflix show Tiger King star Carole Baskin.
Wujastyk further elaborated on the feasibility of these dog-themed meme tokens: “There are many coins popping up and simply riding the Dogecoin coattails. Most of these coins have no utility at all other than being a vehicle of speculation.” He further added: “These are mostly just coins riding the coattails of the current coin mania. Generally, this does not end well and many new traders will likely get burned.”
Since most of these dog-themed meme coins apart from DOGE are Ethereum-based ERC-20 standard tokens, the hype around them led to additional congestion on the Ethereum network and thus drove up the gas fees. Consequently, the price of dabbling into these coins has now increased substantially.
The blockchain is currently in the process of transitioning to Ethereum 2.0, which will see a proof-of-work consensus model replaced by a proof-of-stake consensus that aims to improve the scalability of the network and thus reduce gas fees for investors. But this process will take some time to conclude.
In the meantime, the general love for dogs and the desire to become quick millionaires like several DOGE investors are leading to meme coins flooding the market. But whether it is just a bubble or if there will be a paradigm shift in crypto due to these tokens remain to be seen. Most likely, Doge will pave the way for these coins and decide their future based on its own adoption and price action.
dotmoovs Raises $840,000 From Strategic Investors and Partners
US Investment Bank Cowen to Offer Crypto Custody Services
DeFi lending platform Aave reveals “private pool” for institutions
When dollars meet the hype: The biggest NFT hits from celebrities
MoneyGram to Enable Users to Buy Bitcoin and Withdraw it From Birck-and-Mortar Locations
Here are the Top DeFi Tokens With The Largest Price Jumps This Week
As Elon Musk’s SpaceX Literally Sends Dogecoin To The Moon, Justin Sun Craves For Tron to Tag Along
Buterin Plugs UNI as Next Oracle Token
Can Elon Musk’s ‘damage control’ measures help revive Dogecoin’s price?
Ethernity Chain Immortalizes Tony Hawk’s Last 540 Skate Trick With NFT
ConsenSys-Backed Virtue Poker to be Launched on Superstarter, SuperFarm’s Launchpad
Bitwise Launches ‘Crypto Innovators’ ETF
BitMEX Executives to Face Trial in March 2022
Elon Musk Pokes Massive Hole in the Bitcoin Market After Halting Bitcoin Payments at Tesla
Facebook’s Diem Enters Crypto Space With Diem USD Stablecoin
Aave Has a Private Pool for Institutions Testing DeFi
Venture platform Cognitive Blockchain invests in cross-chain compute network Cudos
Vitalik Buterin Dumps His SHIB, Price Tanks 30% In 1 Hour
Ethernity Chain Memorializes Tony Hawk’s Latest 540 Skate Trick With NFT
MicroStrategy Buys Another $15M Worth of Bitcoin at $55K
Blockchain1 week ago
Crypto Market Cap Added $300B in 7 Days as Altcoins Explode: The Weekly Recap
Blockchain6 days ago
Palantir Accepts Bitcoin for Payments and Considers Adding BTC to Balance Sheet
Blockchain1 week ago
Ray Dalio’s Bridgewater CFO leaves to work on Bitcoin full-time
Blockchain1 week ago
Ethereum price closes in on $4K as Shiba Inu (SHIB) steals Dogecoin’s thunder
Blockchain1 week ago
CFO of World’s Largest Hedge Fund Joins Institutional Bitcoin Firm NYDIG
Blockchain1 week ago
Ethereum (ETH) Hits $3800 ATH As Coinbase Premium Shoots With Institutional Interest
Blockchain1 week ago
Crypto Banter Will Give Away Over $500K To 10 Eligible Community Members
Blockchain1 week ago
Legendary Pelé NFT Set to Drop on Ethernity May 8