No Investors Including Celebs Could Escape As Crypto Volatility Hits Banks

• The crypto market experienced the worst crash in weeks, facing losses in a trillion. Shehan Chandrasekera, a certified public accountant, suggests investors sell their tokens now, that they bought at prices higher than the current ones and apply for the losses refund on their 2022 taxes.

• Chandrasekera also explained that individuals who invested last year will not have to pay taxes on those purchases until they trade or sell those coins.

• The boom of crypto space has also attracted many scammers, making the space vulnerable to scams. According to reports, scammers earned billions of crypto assets by 2021.

Last week, the crypto market witnessed the heaviest downfall in recent weeks resulting in the loss of $1.4 trillion. The impact was felt widely contrary to other previous instances of crashes.

During the pandemic, as the world witnessed, the popularity of cryptocurrencies soared high to a new level. Even celebrities and large Institutions couldn’t resist its pull and diversified their investment portfolio by adding digital assets to it. 

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The level of craze can be calculated by the fact that NFL legends such as Odell Beckham Jr. and mayors like New York’s Eric Adams (D) even choose to receive their salary in crypto over cash. 

The boom also attracted the banking institutions and brokers who earlier disdained the new digital economy. Startups such as Robinhood leveraging the hype reached new heights while certain blockchain-centric enterprises sought the national banking licenses.

Bitcoin and Ethereum, the most popular cryptocurrencies have witnessed a downfall of over 40% from their ATH last week.

Accountant Warns Investors Of Approaching Tax Session Season

Several investors are getting ready for enormous tax bills as the tax filing season approaches.

A certified public accountant and head of tax strategy at CoinTracker.io, a cryptocurrency tax compliance software company, Shehan Chandrasekera explained that the main concept about the crypto among people is that it’s anonymous, that regulators have no idea whatsoever about what they are doing, which is much far from reality. 

The same rules that are applied to bonds, stocks, and other investment products, are implemented on cryptocurrencies. People who invested just last year will not need to pay taxes on those purchases till they trade or sell those coins. 

Chandrasekera also suggested investors who bought digital assets at prices higher than the current prices, sell them now and apply loss as a rebate on their taxes of 2022.

However, in 2021, investors who mined, sold, or exchanged digital assets, may have to pay either income taxes or capital gains taxes for those transactions. Depending on the state tax rates and transactions done by investors who quickly invested their crypto profits or faced losses during the latest Crashdown might struggle to afford these tax bills. 

Beware Of Fraudsters 

Cryptocurrencies’ volatility and vulnerability to scam is often the point of debate in respect to their safety as it experiences their rapid adoption. 

Bad actors in the cryptocurrency arena have profited more than they have lost. According to a January report by the blockchain analytics firm Chainalysis, Scammers got hold of around $14 billion crypto assets in 2021. This put brakes on the increasing popularity of decentralized finance platforms.

The Federal Trade Commission commented that “social media is a tool “ for scammers in investment scams, especially those containing bogus cryptocurrency investments- a field that has witnessed a huge rise in reports.

Last year, over $10 million in virtual assets were taken in more than 20 attacks as per the latest reports.

Crypto.com, a cryptocurrency exchange app that acquired the naming rights to the Los Angeles Lakers’ arena quite recently, suffered the losses of over $30 million worth of assets as they were stolen from digital wallets on the exchange. The firm claims to have taken security measures however did not yet announce them publicly.

A former House Financial Services Committee senior counsel and a financial law professor at George Mason University, J.W. Verret, the variations in the prices are not the only reason to put a crackdown on the industry.

It’s often easy to back an industry during a bull market, however, this doesn’t mean regulatory solutions are needed in a bull market, says Verret.