Social Media Censorship is COMING!! 🤐

We're all familiar with the widespread censorship that has been taking place on social media platforms over the past three years. However, according to numerous bills, court cases and new regulations, things are about to get much worse in 2023.

Have you heard of Bill C-11? Or the Online Safety Bill? Or how about the Digital Services Act?

These are all bills and regulations being proposed in countries such as Canada, the UK and US, as well as in the EU. Rules and regulations that could severely restrict not only the type of content that we can share, but also the reach that it gets.

In my video today, I'm going to take you through some of the most dystopian digital censorship initiatives out there. Proposals that, should they pass, will have implications for not only how we use social media, but the internet more broadly.

You can watch that here.

📊 My Personal Portfolio 📊

USDC 42.54% | ETH 26.81% | BTC 25.17% | ATOM 4.03% | DOT 1.42%

📈 Guy’s Forward Guidance 📈

Things are not looking good. For starters, Silvergate has laid off 40% of its staff and is selling assets following an over 8 billion dollar bank run. The difference between this bank run and all the others we’ve seen in crypto is that Silvergate is an actual bank. Silvergate has given loans to multiple crypto companies, including Microstrategy and Marathon Digital. It also provides services to Coinbase, Circle, Bitstamp, and Paxos, some of the largest companies in the industry.

That’s just for starters. In addition to this, crypto exchange Gemini has given an ultimatum to Digital Currency Group to get its business in order by the 8th January (that’s today!) For context, DCG subsidiary Genesis Trading owes Gemini almost 1 billion dollars. Genesis has been on the brink of bankruptcy for weeks, and is reportedly considering filing now. This could cause issues for Grayscale’s Trusts, which could in turn crash the crypto market.

Another crypto-specific factor that seems to be creeping up on us is the verdict in the SEC’s case against Ripple. I recently saw a headline about Ripple CEO Brad Garlinghouse being optimistic about crypto regulations in the United States. At the same time, Flare Network will finally be airdropping its token tomorrow. Given Flare Network’s relationship to XRP and Ripple, this could be a sign that the case is about to be resolved, for better or for worse.

More importantly, it’s not currently clear whether Binance.US will support the airdrop and list FLR, despite having previously said it would do so. This is significant, because Binance.US has been especially sensitive to regulatory issues related to altcoins. Recall that Binance.US delisted AMP after the SEC called the token a security in one of its lawsuits. As such, Binance.US’s supposed hesitation here could be a sign that Ripple isn’t doing too well.

And then there’s Tron. As some of you will know, Huobi was recently acquired by a firm closely affiliated with Tron founder, Justin Sun. Well, it looks like Huobi is starting to experience a bank run of its own on rumours that the exchange could be insolvent. It looks like Justin has been keeping the exchange capitalised. For reference, Justin is a fairly wealthy guy. He basically offered to take over Grayscale’s GBTC via Valkyrie.

There’s just one problem though, and that’s that Tron is suffering as a result of the Huobi rumours. This is a problem because Tron implemented a mechanism similar to Terra’s UST, meaning TRX’s price has an impact on USDD’s peg. Maybe it’s just me, but USDD is looking very unstable. It’s questionable whether Justin can keep Huobi and USDD capitalised, especially if he’s also holding up other enterprises. Never mind Tron’s importance to USDT.

There are 37 billion USDT on Tron. That’s more than half of Tether’s market cap…

🇺🇸 Two Scenarios, Same Outcome 🇺🇸

I’ve been thinking a lot about the current macro environment, and I’ve realised that there are two possible scenarios, both with the same outcome. To recap, central banks have been aggressively raising interest rates to fight inflation. This inflation is coming from a combination of factors, but I reckon the two biggest contributors are an increase in the money supply as a result of pandemic stimulus, and energy shortages due to underinvestment and the Ukraine war.

Obviously, the only factor the central banks can really affect is the money supply, and they do this by increasing interest rates. Increasing interest rates makes it harder to borrow, makes existing debt more expensive, and also incentivizes saving. This causes the price of goods and services to fall (at least in theory). Right now, it’s expected that the central banks will continue raising interest rates to destroy demand in this manner, until this causes a recession.

It’s believed that a recession will be sufficiently deflationary to bring inflation back down to the 2% target that many central banks have set as part of their mandates. But, as I mentioned a few moments ago, this is only the demand side of the equation. Even if central banks manage to bring inflation back down on the demand side, the energy inflation on the supply side will remain. This means there is a very high chance that inflation will rise again.

Inflation will be worse if the recession is deep, because this could force central banks to pivot, to lower interest rates and/or start stimulating again. This would cause even more inflation. The central banks would raise interest rates again, and inflation would come down again. Assuming no recession, then it would eventually become apparent that there’s still an energy shortage causing inflation. This would force governments to address the energy shortage.

That’s one possibile scenario.

The second is that central banks keep raising interest rates until something in the financial system breaks. In plain English, they will keep raising rates until the government, a big bank, or a big company experiences some issue that could potentially destroy the financial system. If this happens, then central banks will be forced to pivot. This will likewise cause inflation to stay high or even increase, just like in the first scenario.

What’s different about this second scenario is that central banks will not have the ability to raise interest rates to fight inflation. This means that there will be only one option left to fight inflation: address the energy shortage. Assuming this happens, it should result in a massive economic recovery around the world as inflation comes down and central banks finally ease. The same is true in the first sceanrio, though this outcome would take longer to play out.

The only question then is when this energy pivot will occur. Let’s hope it comes soon.

💸 Tax Loss Harvesting 💸

In the lead-up to the new year, we saw many crypto investors selling their assets and incurring massive losses in the process. While a great deal of this was due to the bearish market conditions, you can’t discount the impact of ‘tax loss harvesting.’ This is especially the case in the United States, where the tax year concludes with the calendar year on the 31st of December.

To explain it simply, the tax laws of most jurisdictions allow investors to reduce their tax liability if they can show that their investments have made losses during the year. While the deductions usually have an upper limit, any losses above that limit can be carried forward to the next year in most jurisdictions.

The United States, in particular, is an excellent example of a jurisdiction in which the tax loss harvesting strategy is remarkably effective for crypto investors. This is mostly due to an existing tax loophole which prevents the application of the US Internal Revenue Service’s (IRS) “wash rule” policy to assets that are not considered as a security under the law, (i.e. Bitcoin).

For securities such as stocks and bonds, the “wash rule” prevents investors from buying back the assets that have been sold to take advantage of the tax deduction within 30 days of the original sale. However, the loophole allows crypto investors to effectively implement the tax loss harvesting for short-term crypto transactions (i.e. assets held for less than a year).

Michael Saylor’s MicroStrategy has already taken advantage of the loophole this year, as revealed by the company’s recent filings with the SEC. As per the filings, MicroStrategy sold 704 BTC on 22nd December and bought 810 BTC on 24th December. The series of transactions made the firm a net buyer while allowing it to leverage the maximum tax deductions available under the law.

But cryptocurrency holders aren’t the only ones trying to benefit from the loophole. NFT traders have also attempted to use the tax loss harvesting strategy via the ‘Unsellable’ platform. The platform, which launched last month and describes itself as “Web3 junk removal”, offers instant liquidity for worthless and unsellable NFTs.

NFT traders and enthusiasts were able to offload their worthless NFTs on the platform in exchange for the cost of gas and a few bucks. According to Etherscan, the platform already holds over 16,000 NFTs in its collection at the time of writing.

However, just how much of this is valid remains to be seen. The IRS has yet to contest these deductions. And according to reports, US lawmakers have already put forward several bills aimed at bringing an end to the grant of capital loss deductions for short-term crypto transactions. This means that this tax strategy might not be viable in the long term. Countries such as India have already passed laws barring taxpayers from leveraging tax loss harvesting for cryptocurrency holdings.

So, make hay while the sun shines folks.

Speaking of tax loss harvesting…

🔥 Deal of The Week 🔥

Finding out exactly how much you can write off or how much you owe can be quite a laborious process. Indeed, when tax season comes around, it fills many a crypto trader with dread. Not because of the taxes, but because of the process of calculating them.

If that is you, then you’ll probably want to use some crypto tax software to automate as much of that tax calculation process as possible.

Koinly and Accointing support residents in over 100 countries by making crypto tax filings as simple and painless as possible. Both also feature a tax loss harvesting tool to help you optimise that tax bill. To make things as simple as possible, they also allow you to generate those all-important tax reports with the click of a button.

Using one of these tools means that it is possible to have your crypto taxes done in just 20 minutes!

👉 Try Koinly and do your crypto taxes the easy way!
👉 Sign up to Accointing and get an exclusive 40% discount!

🔮 Video Pipeline 🔮

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✅ Bitsgap Review 2023: KuCoin Trading Bots!

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That’s all for this one. Good luck for the week ahead 🫡

Guy your crypto guy

Disclosure: Authors may own cryptoassets named in this newsletter. These are unqualified opinions, and a Coin Bureau newsletter, is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor.