Bitcoin Climbs Higher as US Crypto Tax Dominates Headlines

As cryptocurrency markets retargeted the $2 trillion market cap milestone, the US Senate approved a cryptocurrency tax provision within the latest $1.2 billion infrastructure bill. Elsewhere, US inflation figures remain at a 13 year high, and crypto-gaming enthusiasm continues as a new augmented reality platform is launched where players can earn Dogecoin.

• Cryptocurrency markets eye up the $2 trillion market cap once again
• US $1.2 trillion infrastructure bill targets crypto tax
• Augmented reality Dogemon launches
• US inflation figures continue to creep higher
• Big-ticket reports to watch out for this week

Crypto market climbs back towards $2 trillion

Even though it happened in May, it may have felt like a long 3 months since the total cryptocurrency market capitalization passed the $2 trillion mark. However, with continued bullish momentum, the markets are now within reaching distance of that historic figure once again.

For three months the markets have been weighed down by environmental concerns and restrictions in China. The downturn had been speculated by many to be the end of what has been an exceptionally bullish year for the industry. But the cryptocurrency markets are currently showing continued strength with many coins and tokens moving back towards all-time highs.

The success marker for most – Bitcoin – successfully cleared resistance at $45,000 and now looks to target the $50,000 psychological level. The second-largest market cap coin, Ethereum, followed suit holding a position above $3,000.

Trading volumes have also been on the rise this week, with $134 billion traded on Thursday in comparison to $100 billion during the week prior.

The founder of itsblockchain.com, Hitesh Malviya commented on the crypto market’s recent move from a period of consolidation. “Consolidation was triggered by institutional investors. For instance, Tesla had stopped accepting Bitcoin in May due to climate concerns but during the recent B Word conference, [Elon Musk] had said the company will start accepting it again after the share of renewable energy in Bitcoin mining is over 50 percent. According to a Bitcoin Mining Council report, the milestone has already been crossed now. So, there is speculation that Tesla will soon start accepting Bitcoin. Also, trading volume had increased by 50 percent as compared to last month.”

Further growth may have been on the cards, but efforts were stunted due to a cryptocurrency tax policy included with the latest US infrastructure bill.

US $1.2 trillion infrastructure bill targets crypto tax

After months of bipartisan talks, a crypto-compromising infrastructure bill was passed last Tuesday in the US Senate. The bill passed with a 69-30 majority. While promising for the country’s roads, bridges, transit, and electrical grid, the bill has faced criticism due to the potentially damaging policies for cryptocurrency innovation.

The bill was first outlined by President Joe Biden and was set to be worth $3.5 trillion. However, after months of deliberation between Democrats and Republicans, a $1.2 trillion plan has now been agreed upon.

The bill included a crypto tax provision to recoup costs, which targets cryptocurrency brokers situated within the US. However, the term ‘broker’ is used extremely loosely and can in fact relate to any person or entity that regularly provides the transfer of digital assets on behalf of another party. This could mean software developers, validators and even node operators would need to provide information to the IRS. Information that they currently do not collect.

The bill has been speculated to be a disastrous move by the US government, and analysts anticipate that many cryptocurrency companies will move overseas. Senator Ted Cruz gave his views before the vote on Tuesday. “This infrastructure bill has in it a portion that is designed to obliterate crypto. That would be a tragic mistake.”

The Blockchain Association concurred with the Senator’s comments. “As written, the infrastructure bill contains harmful IRS reporting requirements that many in the crypto ecosystem lack the capabilities to comply with. As a result, many crypto players will be forced to move overseas, leaving future jobs and economic growth on the table.”

Many in the crypto community were hoping for an amendment to be made. A cryptocurrency amendment was passed to the Senate on 5th August but failed to reach the final ruling.

Although damaging for the US crypto community, the outcome did little to slow the progress of bitcoin and the remainder of the crypto markets during the week. The markets continued to climb higher with bitcoin reaching a weekly high of just under $48,000.

New augmented reality game allows players to earn Dogecoin

After the success of Dogecoin, the meme-based cryptocurrency, a new augmented reality (AR) game has been developed that uses the coin as inspiration.

Dogemon Go builds on the popular Pokemon Go and allows players to catch virtual creatures called Dogemons. By playing the game and leveling up, players can earn rewards that are distributed in Dogecoin. Alongside hunting virtual creatures the game has dropped virtual Dogecoins into the game that players can collect if found.

The new game has been launched on iOS devices and is coming soon to Android. To help monetize the platform developers of the game have offered cryptocurrency projects the opportunity to advertise in the digital world. On the game’s website, it states that it can be an ‘advertising paradise’ for any entity that wishes to project a token/coin within the AR map.

July inflation figures jump higher

US inflation worries continue to rumble forward as July’s Consumer Price Index (CPI) figures were released last week. The loss of purchasing power jumped to 5.4% year-on-year, which is a figure not seen since 2008. Although still at a 13 year high, compared with the previous month’s figures, the CPI had reduced.

Inflation has been a severe worry for many investors and has been anticipated due to the amount of money that was created in a single year by the US Federal Reserve. The money that was printed was used by the Fed to stem the hardship created by the COVID-19 pandemic. However, the effects of this, coupled with the reopening of the economy, are now beginning to show.

The August report indicated that inflation was now seeping into nearly every sector of industry. Property prices and rents have ballooned. Fuel has increased by 2.4%. Airline fares have increased 19% and the cost of vehicles has increased by 41%.

While CPI figures continue to creep higher, the Fed remains steadfast in its anticipation that inflation will subside as the economy reopens fully. Fed Chair, Jerome Powell, continues to believe that the inflation currently being witnessed is transitory. The reduction of month-on-month figures did compliment this view but it remains to be seen whether the downward trend will continue.

During the week, President Joe Biden speculated that the spiking inflation was not a result of Federal Reserve printing but was in fact due to oil production cuts as issued by the Organization of Petroleum Exporting Countries (OPEC).

Big-ticket reports to watch out for this week:

Monday – Japan GDP (QoQ), China Retail Sales (YoY)

Tuesday – UK Unemployment Rate, European GDP (QoQ & YoY), US Retail Sales (MoM)

Wednesday – New Zealand Interest Rate Decision, UK CPI (MoM & YoY), Canada CPI (YoY), US Building Permits Change & FOMC Minutes

Thursday – Australia Employment Change, US Initial Jobless Claims

Friday – China Interest Rate Decision, Canada Retail Sales

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