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Capital Gains (US) - Day trading and Arbitrage

Tue Aug 21, 2018 6:44 pm

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?

Nickel Bitcoiner
Nickel Bitcoiner
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Re: Capital Gains (US) - Day trading and Arbitrage

Fri Apr 26, 2019 3:25 am

the taxation on day trading within the united states makes day trading entirely a lose-lose situation
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Nickel Bitcoiner
Nickel Bitcoiner
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Re: Capital Gains (US) - Day trading and Arbitrage

Thu Nov 12, 2020 4:34 am

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