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Bitfloor Indefinitely Suspends Bitcoin Trading
PerformanceDude writes "Bitfloor (a New York-based online exchange for Bitcoin) yesterday made the following announcement on their website: I am sorry to announce that due to circumstances outside of our control BitFloor must cease all trading operations indefinitely. Unfortunately, our US bank account is scheduled to be closed and we can no longer provide the same level of USD deposits and withdrawals as we have in the past. As such, I have made the decision to halt operations and return all funds. Over the next days we will be working with all clients to ensure that everyone receives their funds. Please be patient as we process your request. Roman — bitfloor.com" According to the company's Twitter account, money should be returned to users' bank accounts shortly.
How would money laundering provide tax evasion? The point of money laundering is to convert dirty money (e.g. money gained from selling drugs, gambling, bankruptcy fraud) into clean money that you're "supposed" to have. Clean money by its nature is taxed.
Careful with names containing L slashdot.org/~AiphaWolf_HK slashdot.org/~AlphaWoif_HK slashdot.org/~AiphaWoif_HK
Bitcoin is already down to $90, where is that $1000 bitcoin troll at now?
$1000? If the Bitcoin theory becomes true some day in the future (a huge if) and it were to replace national currencies for the entire world (an even huger if), it might end up valued at more than $3.4 million each (at 2013 valuation). The math is simple. Current global GDP is about $72 trillion, BTCs are capped at about 21 million, hence $72 trillion / 21 million BTC ~= $3.4 million per BTC at cap time. If this were today then people would use it at 6 decimal places (microBTCs) as the day to day currency, equivalent to about $3.40, and the maximum divisibility of 8 places, equivalent to about ~$0.034, as the corresponding "cents", said valuations adjusting upwards (in terms of purchasing power) at roughly 4% per year accompanying the increase in global GDP.
I doubt any of that'll happen though. For one, governments don't want monetary power outside their hands. For another, most economists around are convinced ("convinced" as in "I believe in it from the bottom of my heart!" and "My preferred theorist said so and his equations are so pretty and I have tons of faith in him!") that deflation is evil. And third, drugs, porn, drugs, weapons, drugs, tax, drugs, pedophilia, and won't anyone please think of the children!?
Conservatism: (n.) love of the existing evils. Liberalism: (n.) desire to substitute new evils for the existing ones.
Surprisingly, no. It can be a great way to make a lot of money.
Take a look at http://en.wikipedia.org/wiki/Dollar_cost_averaging, and then do some basic scenarios. The key thing is that if there's a lot of oscillating between two extremes, then putting the same amount of money into an investment vehicle over a period of time will result in fairly substantial growth of your account - even if, on average, the vehicle itself never gains value.
The system works because when you put in the same amount of cash (rather than buy the same number of securities) basic math is working in your favor. Put $1000 when Bitcoins are worth $200, and when the price collapses to $50, that part of your investment is worth $250 - a $750 loss.
However, put $1000 in when they're $50, and when the price rises to $200, that part of your investment is worth $4000, a $3000 gain. If you're putting the same amount of money in at intervals unrelated to the rise and fall of the currency, then on average, you should have as many "$1000 at $200s" as you have "$1000 at $50s".
Of course, the algorithm wouldn't be useful unless you're in the black most of the time even when the currency isn't at its extremes. If you assume that usually it'll float around the $125 range (half way between $50 and $200), then the loss on the $1000@$200 investments will be $375, and the gains on the $1000@$50 "only" look like $1500. You're still making more than 100% return at that rate.
This is a fairly normal investment scheme FWIW and is part of the logic behind most pension systems. Of course, the stock market doesn't fluctuate anything like as much as Bitcoins do. On the other hand, very few people believe that the stock market will ever collapse entirely.
The danger with this scheme is that there's no guarantee Bitcoins aren't going to permanently collapse, and that would cause your investment to be wiped out. I'm not going to do it in large part for that reason. The amounts involved to make this useful are much higher than I'm willing to bet at the moment.
You are not alone. This is not normal. None of this is normal.
For another, most economists around are convinced ... that deflation is evil.
Those egghead economists have several good reasons to think that deflation is a problem:
1. It strongly encourages everyone to stuff their money in the mattress rather than spend it. This may seem like a great idea, but without people buying stuff, nobody is needed to make stuff, which means people lose their jobs, so they buy even less, and so on.
2. It means that anyone who is saving is more likely to stuff the money in the mattress than they are to invest it. For example, if cash is gaining value at 1.5% a year, you're less likely to take the risk on an investment with 4% return than you will if cash is losing value at 1.5% a year. Which again causes people to lose their jobs, so they buy less, so others lose their jobs, so they buy less, and so on.
3. Bank lending would grind to a halt, for two reasons: First, banks have to add the deflation into the interest rates of any loans, to account for their opportunity cost compared to just keeping onto the money. Second, borrowers know that they have to repay the loan using progressively more and more valuable dollars, and are rightly concerned that this is a really bad idea.
4. Behavioral research suggests that wages and prices do not deflate as they should - workers have a strong resistance to taking what appears to be wage cuts every year, and businesses have a strong resistance to showing what appears to be lower profits on the same product.
5. People, businesses, and governments who are currently borrowing money get crushed, because their debt becomes progressively more pricey to pay off. That's exactly the problem that was motivating the bimetalism movement back in the 1890's, after the dollar was in deflation for about 2 decades.
It's not just equations: There are several historical examples of deflation, and many of the theorized problems with deflation have in fact turned up.
I am officially gone from
1. Set up a shell corporation in a tax haven (e.g. The Cayman Islands).
2. Transfer your IP assets (patents, copyrights, trademarks) to this corporation.
3. Pay a license fee to this corporation for the use of that IP. Make sure the amount of the fee matches your profits.
4. Pay no income tax, because you have no profit.
5. Borrow the money back from the shell corp. Loans are not considered income and are not taxable.
6. Life a nice life while going deeper and deeper into debt to yourself .
7. Eventually you die, and all the debts are cancelled.
Of course, this is not tax evasion because it is perfectly legal.
This is not true. See IRS Form 5471. The rules are exceptionally complex, even by the standards of US tax law, but in general a US person cannot control a foreign investment corporation (such as your Cayman shell corp) and not pay tax on its income, because its income is US income (income from licensing the IP in the US). Loans from a controlled company back into the US to the controller can be considered distributions of income in some circumstances, such as these.
Note - what Google et al are doing in its Irish/Bermuda company is accumulating foreign (non-US) income from intellectual property. This is different.