Over the past few weeks, bitcoin and cryptocurrencies have been a hot mess. Every excuse to sell was seemingly exercised, first by the blockchain newcomers, and then by the former strong-hands of the digital market. It made for an incredibly frustrating (and painful) exercise, particularly as the so-called bitcoin Senate hearing was on the horizon.
Indeed, prior to the bitcoin Senate hearing, the king of cryptocurrencies fell hard, hitting lows not seen for several months. The blogosphere lit up with all sorts of random blockchain conspiracy theories, all spread fears that the U.S. government was poised to crackdown on cryptocurrencies. At this point, long-time bitcoin proponents gave up and decided to cut their losses.
To be fair, the fearful emotions were understandable. Other major government bodies publicly announced either crackdowns or sharp limitations. The bitcoin Senate hearing appeared to be the ultimate culmination of government intolerance.
What I didn’t understand, though, was acting on those emotions. Few positives, if ever, result from panicking.
It turned out that panicking was exactly the wrong move. Rather than clamping down on cryptocurrencies, the bitcoin Senate hearing merely opened the floor to discussing the broader implications of the blockchain. In fact, key government officials were interested in the technological innovation that a decentralized distributed public ledger system provides.
Just as quickly, the bitcoin price sprang to life. At time of writing, the digital token is above $8,000 across several exchanges. But if our government wasn’t interested in cracking down on cryptocurrencies, what was the purpose of the bitcoin Senate hearing?
It was simply a message to say, we hear you and we love you; we just want your taxes!
Let’s be real. Uncle Sam knows damn well that no matter how rich you get off bitcoin or cryptocurrencies, you will need to convert your gains to good ol’ fiat dollars. Sure, you can transact within the bitcoin economy, live off the grid, so to speak. But we all know that this economy is incredibly limited. At some point, most, if not all people will cave.
Again, the government doesn’t want to confiscate your bitcoin. They just want their cut. Certainly, it wouldn’t make sense for them to deliberately crash the cryptocurrencies, either. That would force the IRS to honor tax deductions for capital losses.
No, the bitcoin Senate hearing was primarily a warning: pay your taxes like any other working stiff, or be prepared to face the consequences!