Assuming one does pay taxes when buying USD with BTC, would EACH conversion of BTC -> USD incur capital gains? That is, if BTC are modeled after forex or securities in tax terms.. don't you have to set aside something for taxes each time you realize a gain?
The reason I ask is because I see a lot of people mentioning market day trading, "selling high buying low" every day. Similarly, I hear about people having bots that perform arbitrage between exchanges where the "profit" is larger than the fees incurred.
However, usually I do the math, and if short-term capital gains are considered, most of the above transactions that happen in regular volatility and not BIG volatility actually lose money or barely break even. As an example:
Spend $10,000 on BTC at $100, get 99.4 coins after mtgox fees.
Later that day, sell 99.4 coins at $120, get $11856 after mtgox fees.
This is a capital gain of $1856, set aside a third for taxes. You now have $11237 in fiat.
Later that day, buy back in at $112. You get... 99.4 coins back.
All you have accomplished is a) making some money for the IRS and none for yourself b) resetting the timer for long-term capital gains tax rates.
Am I missing something, or is the above interpretation accurate? Is the takeaway just that a lot of US-based traders don't plan on paying taxes or haven't looked into them enough?