WhiteboardCrypto Newsletter - Jan 4

Welcome back to this week's edition of our WhiteboardCrypto Newsletter!

Fun fact: Bitcoin turned sweet 16 on Friday! Satoshi mined the Genesis block on January 3, 2009.

ETH holders more long-term than BTC

According to IntoTheBlock, in 2024, the percentage of holders that held their ETH for more than a year rose from 59% in Jan 2024 to 75% by the end of 2024. The number of long-term BTC holders fell from 70% to 62% over the same period. This could show that long-term BTC holders are selling as the asset keeps hitting ATHs and/or it could show that people are bullish that ETH will continue rising. It could also show that people who hold ETH aren’t in crypto anymore though, and their assets are just sitting on the chain, so it’s a good reminder that we can’t assume someone’s motivations. Either way, it’s interesting to consider what is being used and what it is being used for—the Ethereum chain is very expensive relative to Bitcoin, so maybe people are just more comfortable trading more cheaply.

Learn more here.

US IRS broker rule is broken

A new tax rule has been put through in the US that will require front-end DeFi protocols starting in 2027 to file a new tax form that includes information such as transaction history, transaction IDs and wallet addresses of users. This extends the legal definition of a “broker” to DeFi websites and even some wallets, which some people think is unlawful because a broker is defined as someone who facilitates a transaction. DeFi protocols don’t manually facilitate anything; rather their websites are just simple ways to access public smart contracts.

As an example, Fidelity (an actual broker), can ONLY be access through Fidelity.com. Meanwhile, the Uniswap smart contracts can be accessed through their official website, a website I could develop, a website you could develop, and even blockchain explorers like Etherscan.io. In other words, I could use the Uniswap smart contract without ever visiting Uniswap.org, making the "reporting" useless and incomprehensive. A variety of lobbying groups filed a lawsuit against the IRS and Treasury Department to dispute this ruling.

Other US tax things (sorry)

The IRS rules regarding the cost basis (purchase price versus selling price) of crypto purchases on centralized exchanges (CEXes) have been delayed until January 2026. This delay will give both the CEXes and users time to figure out their accounting processes, as users should be able to choose an accounting method, otherwise the crypto exchanges will default to the First In, First Out (FIFO) capital gains calculation method, meaning the oldest assets are treated as sold first. How this will be implemented is complicated and there are a lot of legal challenges being brought against it, so hopefully this extra time will help bring clarity.

And the last US tax-related news we’ll share today is a big one. Starting for their 2025 taxes, residents will have to report their crypto earnings or losses on a per-wallet cost-basis strategy. This means that for every crypto transaction, you must track which wallet the asset came from and how much you originally paid for it. For example, if you bought 1 BTC in Wallet A for $10,000 first, and then 1 BTC in Wallet B for $14,000, and then sold your BTC from Wallet B for $15,000, here is the difference:

• Historically, your profit was $5,000 ($15,000 - $10,000 from Wallet A).

• Now, your profit is only $1,000 ($15,000 - $14,000 from Wallet B).

In this example, you would report less of a profit, but there are also scenarios where you “profited” more than would’ve before the new rule; either way this increases the burden on the taxpayer to prove how and where they got their funds. Overall, this makes DeFi accounting much more difficult for US users.

(Here’s a question for any tax pro familiar with this new rule: would a transfer from Wallet A to Wallet B, be considered a “taxable event”?)

Considering all these changes, we strongly recommend consulting a tax advisor or accountant regarding how you should file your crypto taxes.

Tether’s market cap drops by $3b

Yes, that’s billion with a B, but it’s only 1% of the stablecoin’s overall market cap. The European Union’s Markets in Crypto-Assets (MiCA) stablecoin regulations have already been live for 6 months, but USDT hasn’t received a license to operate yet. Earlier this week, a variety of exchanges decided to delist USDT (Tether) because of concerns about its lack of compliance. We made a video about USDT a few years ago that highlighted some of the concerns about their transparency and liquidity (though they have since released more information); as a stablecoin, it is supposed to be backed by a basket of assets that will always maintain its value at $1, meaning if you have 1 USDT you can sell it to receive $1. But not all stablecoins are created equal and many have lost that peg, meaning the value of the stablecoin dropped to less than $1. A drop in market cap does not equal a drop in the peg, but depending how USDT’s reserve is structured, it might cause volatility in the value of the asset. But that hasn’t happened yet, and since Asia holds the majority of the market cap, it probably won’t. It is important to be aware of though since the EU hasn’t yet decided if Tether meets its requirements.

Learn more here.

Thanks for reading and I hope you learned something!

- Theodore