Crypto Taxes – Switching

First, apologies for folks who posted really good comments on one of my previous posts — been busy. I went from Grandparent-of-two to Grandparent-of-four, and they live with us, and … its amazing, but man its hard to get time to think. Mostly we’re taking care of the older two while mom recuperates from C-section and the newer two are integrated. #devops #fixitinprod

Earlier in the year, I made a decision – heck with Taxes, I’m going to investigate Crypto things. So I did – I investigated liquidity mining, and staking, and some other mining, and stuff and stuff. And now .. i’m paying the price (in time).

I used to use cointracking.info (no link). I ran into problems. Something as easy as importing ETH transactions from my Trezor – 34 entries. It shows a balance.

There is no balance. Using their data from their screen, in excel, added it up, NO FRICKING BALANCE. See here with Blockchain explorer. And their import from Binance.US – very broken.

I lost faith in them. So, I need to switch.

I’m trying out cointracker.io instead. Good news, they integrate well with various well known things. Bad news, lots of other stuff I have to do a lot of labor to get data over. Hence the checklist which I posted a screenshot of earlier. Pretty sure I’m going to leave “free tier” here shortly (5 wallet limit), but I suspect I’d have to do that with whatever I went to with the amount of experimentation I’ve done.

A particular pain: I was hoping I could connect cointracker.io to binance.com directly – but binance.com is serious about locking out anybody from the US. I can’t log in there anymore. Not even read-only. Bummer. Luckily, I DO trust the info in cointracking that I got from Binance. Just takes some reformatting.

And is all of this worth it? Well, for the experience – yes. However, my stint in Liquidity mining – Sure I got some returns, but the impermanent loss was made permanent. And Staking – its ongoing, but it feels like I’m gaining at exactly the loss-of-value-due-to-inflation rate of the currency (DFI). They promise something awesome when they do X Y Z in the next 2 months, I think I’ll probably pull the plug around Christmas, I don’t want to deal with the headache of reporting 2 transactions per day of staking rewards paid in the future. And I fear what Cardano’s upcoming liquidity contracts will do to DFI’s world.

Ordered a HNT Helium “People’s Network” Miner

Partly because I’m greedy, however, I stand to make maybe 50 cents a day on it .. payoff over 1-2 years at that rate. In order for it to make the bigger bucks, it needs another 2 HNT Miners within 350 meters to 2km away or so. Then the possible rewards jump up to $150/month. Maybe.

But its not just that. Its also – when I searched for a tracking dog collar, all of them had a $5/mo or so subscription for “data” for sending signals home via a cell tower. This particular network aims to cut that cost way down. But it needs people to have hotspots out there, and thus.. HNT Miners.

I want to get a sump pump that can tell me when it activates. I want a Tile that works everywhere for low cost and long battery life.
Their network is large enough now that Lime Scooters use them for tracking.

So, for just those reasons, I went ahead and invested in a Bobcat Miner. Except, maybe I got scammed? Pretty sure I went to the right URL, and my purchase experience matched those of people on YT. I ended up buying it with some ADA which I sold to get USDT. It has a 8-12 week lead time before it gets to me (once an block of orders is full, it gets manufactured then sent out). It was the fastest Miner I could get, unless I went for the more expensive Syncrhobit, which is $650.

Alas, I’ll not get the miner until after the first Halving, which happens August 1st. So the approx 0.5-0.7 HNT that I might get will go down to 0.25. maybe less if the number of hotspots goes way up. On the other hand, they’re moving to something called the validator network, which is offloading some stuff from Miners, which then takes all the HNT set aside for Consensus Groups, and gives that to Miners. So it might go up a bit.

And then also because of the halfing, the reduced supply might drive the price up as well.

Anyway. My plan is to get my one node up, and then see if i want to invest in a second node and see if I can talk a friend or relative into hosting it for a month. And if it brings in good $ (to both nodes), then … hey they can keep the node. The payoff time goes from 1 year down to 2 months or something like that, and then its just Latinum thereafter.

The internet bandwidth is not inconsequential. Its like 20G per month. Although that might go down when the validator nodes show up.

Kinda excited. I hope a decent dog collar using the Helium network shows up soon so I can justify my tinkering.

Hot attic office mining ETH

I have an attic office that gets pretty hot during summer. Not too crazy, its insulated, but it gets hot. I have my ethereum miner (T-Rex) set with “shutoff at 70c, don’t start again till 60C”. I get there, and its running for a bit then off for a while… I turn on the AC .. This is what happens: (see cover picture)

I find it interesting that the ambient temperature just needs to come down to 85F in order for it to work okay.

The actual console output. It cools down and heats up pretty fast.

This is what the mining pool sees of my contribution.

I can probably get a better rate if I vent the hot air out of the office… but that would require a bit of work. Hmm. Not too much work. I’m not going to run the A/C just for mining. That would eat into my … max $2.56/day in profits.

Estimated Profits. Mining Pool says more like $2.03 per day.

I somewhat failed at gracefully HODLing Bitcoin

This bitcoin pump cycle caught me off guard. I’m Feeling pretty stupid at the moment; so it is important to process the underlying stuff.

a) Always look at the prices with a scale which starts with 0. Then it would have looked like this:

Instead, what I saw was this, and then I pulled a trigger:

If I backtrack further, the other thing I’d say is: Don’t gamble with money that is “meant” for something else. I really need to pay off one particular credit card. However, the Bitcoin pump came around (i did not know about the halving cycle)… so I put whatever assets I had sitting around (which, mind you, I was NOT paying the CC with, but cushion for toys, more like) in .. and then it became very crucial to NOT DECREASE NOT TAKE A LOSS on that money. Truth be told, I wanted a guaranteed short term return, I was not ready for the long term HODL.

At first I was going to berate myself on “changing my mind” and selling then buying back in at a lower rate (retracement) or sometimes equivalent rate (it rebounded too fast!) because of the extra exchange fees and taxes I might be paying, but then I did the actual math — Looking at it in the long term, as long as all the tax rates are the same (Short term vs Long Term) – Sellng and buying on a retracement can be okay:

(link – also note that “What you get back” is after taxes are paid. Spreadsheet has many hidden lines. You just pay more taxes earlier in the latter case, but once all taxes are paid, its mostly exchange charges that get you. You probably have to have a retracement > 4 times the exchange rate for it to be worth it. )

I would write something in here about searching for the moving average that looks like it supports the price curve, basically getting a feel of the volatility — then making an internal rule, “I will sell when X dips below Moving Average Y for more than Z time units” – HOWEVER, that’s probably not in line with (a). Maybe it is. Do I really want to buy retracements? I just don’t want to miss the final top. When Do I knows its a final top? I don’t have an answer to that question yet. Maybe its just a “this is good enough” top.

And finally, the FOMO. I KNOW its happening. I don’t want to miss it. I don’t want to be the technical guy who KNEW it was happening AND MISSED it. I don’t want to look incompetent! to my imaginary audience who might be judging me. I judge myself. I judge how much my judge-o-meter is set at. I judge me judging my judge of my judgement.

(LPT: Take a failure, write a blog post about it, then it looks competent)

What is my goal? Financial Independence. Be more willing to take calculated risks rather than just running away and trying to be “safe” and then wonder why nothing happened.

Bitcoin and Cryptocurrency Info

Dumping knowledge while I have it for my future self.

Where to buy it: Binance.Us, but it takes a long time to get verified. Much better trading tools – can do limit trades, stop limits, etc. Coinbase.com, I was already verified there so it was easier to get back in. Only does Market price trades at least at my level, there’s a Pro thing as well. If you are international, Binance is a good place to go. CEO seems very honest. Many exchanges: https://coinmarketcap.com/rankings/exchanges/

Has it arrived: Yes, institutions and companies are getting into it, especially as Fiat currencies print money like crazy.

Why is it trustable: Its code, its decentralized, once the rules are set in place, they cannot be changed except by a truly majority vote of stake holders / miners (depending on your coin). Thus, it is not subject to the whims of a central authority to twiddle with the supply. Oh, and the code ensures stuff like money cannot be double spent, that once its done it cannot be un-done, etc. It does, however, require the Internet and electricity to function, so its not quite the same as Cash or Gold.

But isn’t it just made up? Yes, its as made up as the … German Papiermark or the US Dollar. There’s a consensus of human belief in its worth, and in that there is trust, and thus it exists.

How many people believe in it? 33 million or so right now, and now it includes folks like Square and PayPal and JP Morgan.

But there are so many of them? There are also many possible Social Networks, yet Facebook / Twitter seem to be “winning.” Somebody could clone Facebook, but unless you have the community buy in, you have not got anything. But you can have a cool set of features. But community may still not buy in. Similarly, the “winners” by Market Cap right now are these (coinmarketcap.com); they all have “features”:

Bitcoin = original, most widespread. Super fixed supply, which will yield a mad scramble as Demand picks up. Now super hard to mine. May get Smart Contracts soon?

Ethereum (ETH) = easier to mine (I can mine it on my GTX1070), but going to transition over to “staking” soon. Can do smart contracts where you put code in with the value. Many many other coins use Ethereum (2.0, not classic which is ETC) as their “backbone”.

After that, you’re starting to pick and choose. XRP was a big hitter, but there are .. lawsuits and problems there, at least in the US.

Where to learn more: I’d recommend these Youtube channels: https://www.youtube.com/c/CryptoDaily (very engaging entertaining host), or https://www.youtube.com/c/CoinBureau (much more bookish, slower pace of videos, but incredible research). There’s also Chicken Genius Singapore https://www.youtube.com/channel/UC0OnreqP55xLpA6W5nzxb5Q who touches on it a bit, but more focuses on Not Being a Donkey.

I want to mine something with my hardware: https://whattomine.com/ choose your video card and exchange of choice. Right now ETH works. Costs me 40 cents a day (140W), earns about $2.30 a day (at current exchange). Basically, the CPU heats my attic office during winter, I don’t have to run a heater as much. Summer probably a no-go for me.

Dealing with Taxes: In the US, you get to report everything, and you really need to use software to calculate that. Expect to spend $100 per fiscal year on that software, unless all you do is stay on one Exchange, in which case they may have reports you can download. I personally use cointracking.info, its not the easiest to use, but it supports API pulls from Coinbase and Binance and Trezor, so I’m good with that.

Hardware Wallet: I got a Trezor; but reality, unless you get above say $10k in a exchange account, don’t bother. I no longer use my Trezor.

How to actually do Crypto: Don’t do what I did. Instead, Dollar cost average – a little bit per paycheck – into.. pick two or three that you think might be around long term. Do that for 3.5 years awaiting the Bitcoin Halfling .. https://www.coindesk.com/bitcoin-halving-explainer – March 11 2024 .. and then think about exit strategies at that time, and the year or so after that. (Maybe – institutions may change the charts). Understand the Bitcoin / Altcoin pump cycle and “Altcoin Season” – https://medium.com/swlh/understanding-cryptocurrency-market-cycles-for-better-investments-c6cc4bc80099 – before you go putting money in Alt Coins. While your money is in Crypto, its not available for anything else unless you get a line of credit against it.

Next post may stay private, its about how I … screwed up, and lessons learned.

More playing around with Cryptocurrencies

I understand a lot more now. A lot of thanks to @sirajraval who does amazing in-depth videos about all kinds of applied computer science things.

I am not a .. whatever the words are. Advice-giver-fundy-wundy-thingy-wingy. I’m just a guy. If you things you’re getting advice in me, you’ll probably loose money on those bets. Smile

I think the Idea of cryptocurrency is great. There’s definitely a need for a mathematical, un-corrupt-able middle man know as Math. Something along the lines of “We can all agree this is the truth, that this ledger is accurate”, something that cannot be fudged.

Note that in these screenshots, I have not masked any of the amounts. Yo, this is chump change guys. I spend more on coffee. I can’t help it that BTC went up 75x making it valuable.

Inventory

First, an Inventory of various Crypto Currencies of various flavors .. these are the ones I’ve been interested in.

I think Bitcoin (BTC), while famous, is not going to be the long term winning solution.

But because its famous, people are throwing themselves at it
Which causes it to bounce all over the place
Which excites lots of other people
Which causes it to bounce even more
It can only handle so many transactions per second
Lots of people want to transact in it
Which leads to really large transaction fees (you have to volunteer in to a large transaction fee or your transaction gets ignored in favor of others who volunteered a large transaction fee).

I was moving BTC over to my hardware wallet, the fee was $35 at the time, regardless of how much I moved.

There’s plenty of supply left
There’s plenty of people in the world, ie, untapped demand, left
So its going to bounce around a while longer I think. As long as there are curious people out there.
Will likely get relegated to “how to move large sums of money around” more than “small transactions” just because of the upscaling of transaction fees.

There’s Ethereum as well (ETH)

Its ability to do contracts .. ie, programming .. ie, stuff like giving somebody a loan, getting back payments, and calculating here’s how much balance is left given an interest rate ..
you don’t have to trust anybody else to say what the balance is. The math is all there in the contract, and its enforced by shared truth
At the same time, if somebody mis-writes a contract … that’s going to be interesting.
Siraj: https://www.youtube.com/watch?v=-_Qs0XdPpw8

I did some digging around, and I found Monero (XMR)

Its the not-traceable one. Can’t tell who gave how much to whom —
you have a secret A, which gives you a receive address B and a view key C.
Any time you want to get paid, you say “send it to B”
If you want to see if somebody got paid, you need their view key C to see if they got paid. If you don’t know the view key, you have no idea who paid what to whom or how much.
Pretty sure folks will use it for illegal purposes.
Its one of the easiest ones to use, GUI wise.
You can still mine this for profit with a mid-range CPU.
So I think it will be pretty stable / get famous (or infamous) / have value.
Siraj: https://www.youtube.com/watch?v=cjbHqvr4ffo

There’s a fork of Bitcoin called Bitcoin Cash (BCH) —

Lots of people owned bitcoin at the fork date ==> they all own bitcoin cash now as well.
Its much easier to transact than BTC, with much lower transaction fees. Must faster, too.
It has a good chance of future survival.

And then I found Iota (IOTA)

No miners!
When you want to do a transaction, you volunteer in to doing at least 2 confirmations. So its a .. pay it forward kind of thing. “The more people use it, the faster it gets”.
Siraj: https://www.youtube.com/watch?v=B37UbzPlSzw

Tools and Services

This is what I’m familiar with so far:

Coinbase.com — this is how I converted my dollars into cryptocurrency. I have it set up to take about $15 from every paycheck and spread that over BTC and ETH at the moment. I inherited some BCH due to the split, and I did dabble in some LTC but I got rid of it once BCH came around.
trezor.io – this is a Hardware Wallet that I purchased, and moved most of my BTC and ETH to.

Sounds fancy. All it is, its… like a flash memory thing. It has some unique numbers stored on it. There’s no way to directly read those numbers off it.. all you can do is log in to it, and say “here sign this thing with those numbers”.
If it gets damaged or whatever, there’s a list of 24 words to use .. written on paper .. in my safety deposit box … that can be used to reconstruct the unique numbers used. It happens to be that its a “standard” way of doing this, so even if Trezor dies and you can’t get another device like that, there’s several other wallet systems which will accept the 24 words to get back to the secret keys
The unique numbers are what give you access to the math that’s stored in the blockchain, the “shared ledger” across several hundred thousand computers around the internet.

binance.com – this is one of many exchanges that exchange value between cryptocurrencies. Use it to quickly convert ETH or BTC to other coins.

Converting ETH to IOTA and XMR

This was a wild ride for me, so here’s a quick summary —

I signed up for an account. They do email verification.
I locked my account up using 2FA.
I deposited ETH (it gave me an address to send the ETH to.. i went to coinbase and sent it). Turns out I had to do it twice, because there’s minimums involved in withdrawing which are around $30 USD equivalent. Here’s what that looked like:

I went to the ETH/IOTA trading screen and exchanged ETH for IOTA. (Somebody else had IOTA and wanted ETH, the exchange helped us find each other).
Ditto, ETH/XMR
The screens for this are crazy with candle graphs and stuff. Made me feel super finance nerdy. There’s also limit and stop limit orders and stuff .. great if you want to day-trade-gamble.
Once done, I withdrew funds from IOTA and XMR to my IOTA and XMR wallets.

Here’s what that looked like on the Binance side:

Here’s what it looks like in the Monero wallet:

.. as it scans for more transactions involving me.

Here’s what it looks like in the Iota wallet:

yep, still pending.. there was congestion here, need to wait till other transactions happen which will in turn then verify the above transaction. (the 0 transaction was me clicking “attach to tangle”, which I didn’t understand at the time, but was basically saying “yo say something so that this wallet is established somehow even if nobody gave it money”.)

Whee! So now I have some money locked up in a wierdo thing that only other wierdos would recognize my money in. Ie, I’ve made my money LESS USEFUL! Whee!

Taxes

So, tax season is about here. There used to be doubt, but now its been removed, so this is pretty much how I’m going to do it regarding the US Tax code – although this doesn’t take effect till the 2018 season .. but:

All transfers into and out of a wallet are short or long term capitals gains, based on the crypto/USD value at the time of the timestamps involved. Regardless if you’re sending it to another wallet that you own or not.
(there’s some flexibility for which crypto/USD index to use, i’ll find something with an API)
Coinbase provides a FIFO calculator, which is excellent – they are the bulk of my everything, and the point where my USD happens. I’ll pretty much use that for my taxes, and count transfers to other wallets as short term gains (if applicable). Future lesson is, if something is going to appreciate a lot, PARK IT AT ITS FINAL LOCATION QUICKLY before it starts appreciating to avoid tax penalties.
I ran some math to figure out how much of a difference things make .. other than making everything short term rather than long term, moving the money to another account in the same currency doesn’t do much on the taxes – the nets are the same.
At some point, somebody’s going to write some decent tax software to go along with owning crypto currencies .. or they’ll write it for the tax guys so that the tax guys can tell you what you SHOULD have paid. Something like https://bitcoin.tax/ probably.

Okay, that’s about it. The only other thing to throw out there would be, because Bitcoin went up so much, I cashed out enough of it so that even if it (or any of my other coins) went down to $0, I’d still have made money on them, not be in the hole. Good place to leave off the end of the year, I think.

Cheers, laterz.

Oh, I’m running simpleminer.io to mine XMR while I’m using my PC’s. Haven’t gotten any XMR payout yet.

Visualizing Bitcoin Adventures

I’ve been riding a Bitcoin (and Ethereum) roller coaster for a year .. and its been a fun little diversion. However, its hard to see the journey .. it feels like I’ve come out ahead, but have I really?

I doodled various (complicated) ways to try to show stuff via a 3D graph .. but when I actually went to play, this 2D version works just as well:

Vertical (down) drops == I transferred bitcoin (either to another account, or buying something with bitcoin).
To the top-left = I bought bitcoin for USD
To the bottom-right = I sold bitcoin for USD (for buying something usually)
Note: A similar chart would exist for my Ethereum account. No, i did not buy a switch for $90, it was more than that.
Steep curve vs Shallow curve gives a feeling for price. buy Steep, sell Shallow is the desire.
I could beat myself up .. if only I hadn’t spent the bitcoin, I’d have so much more now…
Currently, my experiment is net-positive. Even if bitcoin goes to $0 right now.

How I created this

Download transaction report from Coinbase. This is a .CSV file, which I then open in excel.
Their report has a “Amount” (Column C) which has + for bitcoin added, – for bitcoin removed.
Their report has a “Transfer Total” (Column H) .. but it isn’t signed.
Their report also has a Transfer Fee column .. I’m ignoring that for this graph. I did sum it up, I’ve paid $30 in fees this year.
Add a new column, “Signed Transfer Total” formula is something like “=IF(H27<>0,H27*SIGN(-C27),0)” – to get a signed USD column. Note that I’m reversing the sign so that a plus in bitcoin is a minus in USD.
Add a new column, “USD Balance”, which sums up all the Signed Transfer Total to date. Something like “=SUM(J$6:J27)”. For simplicity I added it right next to their bitcoin balance column
Grab those two columns and chart it, scatterplot, lines
Adjust the vertical size of the graph till you get something that works for you.

In summary

I do not regret this Bitcoin experiment.

I do hope to leave stuff in Bitcoin, i think it will continue to grow for a while.