Taxing bitcoin like labor
April 23, 2021
–New highs in grains yesterday, for example July Corn soared 25 cents to 631 1/2. In December, the July contract was around 425. April bitcoin was trading 52000 late, down over 3500 on the day and around 20% from the high made mid-month. It is currently just above 48000. I used turbotax for my taxes, and there was a specific question asking whether I had traded digital currencies. There are stories circulating about new entrants to these markets belatedly discovering they have large tax bills. This year’s tax deadline is May 17, just a few weeks away, and I suspect that Biden’s capital gains announcement yesterday jolted the crypto cohort. How do you raise dollars to pay taxes on digital ccys? By selling them.
–Stocks also reacted negatively to Biden’s plan to raise cap gains taxes on the wealthy to 39.6%, but even with ESM down 35 late, the lows from Wednesday weren’t breached. In all likelihood the plan will be watered down. However, in the bigger picture, stocks rose in the early part of Trump’s term due to lower regulations and expected declines in taxes. The offset was a Fed that was becoming less generous, especially with the 2018 taper and hikes. We now have a President making good on his promise to raise taxes and increase regulation with stocks near all-time-highs. The counterbalance is a helicopter Fed.
–Interest rate futures showed little change on the day despite volatility in other markets. Tens were steady at 1.554%. Eurodollars traded a narrow range with the entire strip out five years settling unch’d to down 0.5 bp. One large trade was a buyer of 40k 0EZ 9937/9912ps vs sell 0EZ 9962c, taking a 4 bp credit. Underlying is EDZ22 at 9957.5, expiry is in December of this year, 12/10/21. Curve roll is a headwind here. The package settled 4.25, call over. The contract before is EDU22, which settled 9967.5; the same strike 3-way settled 8.25 for the call. In front of that, EDM22 settled 9973.5 with all the value in the call, settling 11.75. Strong forward guidance of hikes in 2022 are a necessity for this trade.
–EUR absorbed Lagarde’s comments yesterday and is pushing higher today, above 1.2050. Dollar weakness should be a negative for the long end, but concerns about stocks are keeping a bid in FI. May treasury options expire today with TY currently hugging the 132.5 strike.
