MODULE – V
Launch Pads, Trend Lines & Crypto Taxation
Module 5 Insights
In this module, you will learn:
- What are crypto Trend lines?
- Use of Trend Lines.
- How to ready crypto trend lines?
- What are launch pads?
- Some Famous Launch Pads
- Crypto Taxation
- Frequently Asked Questions about BTC Taxation
For your convenience, we have divided this module into the following different steps:
Step 1: Crypto Trend Lines
Step 2: Use of Trend Lines
Step 3: Launch Pads
Step 4: Top Launch Pads
Step 5: BTC Taxation
Step 6: CMC
Step 7: Crypto Taxes
Step 8: A Quick Quiz
Step – 1
Crypto Trend Lines
Trend lines are diagonal lines painted on charts in the financial markets. They make it easier for chartists and traders to visualize price movements and spot market patterns by connecting certain data points.
One of the most basic tools in technical analysis is trend lines (TA). In the stock, fiat currency, derivatives, and cryptocurrency markets, they are commonly employed.
Trend lines are similar to support and resistance levels, however they are made up of diagonals rather than horizontal lines. As a result, their slope might be either positive or negative. In general, the stronger the trend, the steeper the line’s slope.
There are two types of trend lines: ascending (uptrend) and falling (downtrend) (downtrend). An uptrend line is traced from a lower to a higher chart position, as the name implies. As seen in the diagram below, it connects two or more low locations.
A downtrend line, on the other hand, is drawn from a higher to a lower point on the chart. It is a bridge that connects two or more high locations.
As a result, the difference between the two types of lines is the point selection utilized to draw them. In an uptrend, the lines will be drawn from the chart’s lowest points (i.e., candlestick bottoms forming higher lows). Downtrend lines, on the other hand, are drawn with the highest values (i.e., candlestick tops forming lower highs).
Step – 2
Use of Trend Lines
Trend lines are drawn from the highs and lows of a chart to show when the price briefly defied the main trend, tested it, and then returned to its favor. The line can then be stretched to try to forecast critical future levels. The trend line may be examined numerous times, but it is regarded as genuine as long as it is not broken.
Although trend lines can be used in any type of data graphic, they are most commonly utilized in financial charts (based on market prices). They give information on market supply and demand. Upward trend lines, of course, suggest a growing buying force (demand is higher than supply). Consistent price reductions are coupled with downward trend lines, implying the inverse (supply is higher than demand).
However, in such assessments, the trade volume should also be taken into account. For example, if the price rises while the volume falls or remains low, it may provide the mistaken appearance of growing demand.
Trend lines, as previously stated, are used to indicate support and resistance levels, which are two fundamental but crucial concepts in technical analysis. An uptrend line depicts levels of support below which the price is unlikely to fall. The downtrend line, on the other hand, indicates resistance levels above which the price is unlikely to increase.
In other terms, when support and resistance levels are broken, either to the downside (for an uptrend line) or to the upside (for a downtrend line), the market trend may be regarded incorrect (for a downtrend line). When these crucial levels fail to hold the trend, the market frequently shifts its course.
Still, technical analysis is a subjective discipline, and each person may draw trend lines in a completely different way. To limit risks, it may be worthwhile to combine different TA techniques as well as fundamental analysis.
Forming Reliable Trend Lines
Trend lines can technically connect any two points on a chart. However, most chartists agree that a trend line is acceptable if it has three or more points. The first two points can be used to describe a prospective trend, and the third point (extended in the future) can be used to test its validity in some instances.
As a result, if the price touches the trend line three times without breaking it, the trend is legitimate. Multiple tests of the trend line suggest that the pattern isn’t just a coincidence caused by price variations.
Settings of Scales
It’s crucial to think about suitable settings while drawing trend lines, in addition to choosing enough points to make a genuine trend line. The scale settings are one of the most significant chart parameters.
The scale in financial charts refers to the way the change in price is represented. Arithmetic and semi-logarithmic scales are the most prevalent (semi-log). Change is expressed evenly as the price goes up or down the Y-axis on an arithmetic chart. Semi-log charts, on the other hand, show percentage variations.
When designing trend lines, it’s crucial to keep the scale settings in mind. Each chart format may produce slightly different highs and lows, as well as slightly different trend lines.
Step – 3
In the crypto world, there is one universal truth: whoever gets in first wins!
When a project gains a lot of traction, it’s added to a cryptocurrency aggregator’s list. It’s difficult to find and identify projects when they’re still in the early stages. If you miss out on those projects, you’ll be missing out on a lot of money.
Is there a website or aggregator that can help you find early-stage crypto initiatives before they go mainstream? Yes, and we refer to them as Crypto Launch pads. Consider these services to be the cryptocurrency version of Wikipedia.
Crypto launch pads have gotten a lot of attention recently. You may use them to find early-stage cryptocurrency companies and participate in their presale rounds. They also have a vetting mechanism in place to prevent frauds and rug-pulls, so you may invest without fear of losing your hard-earned money.
In this module, we’ll go over some of the most popular crypto launch pads available right now.
Step – 4
Top 6 Launch Pads of 2021
The top launch pads are as follow:
- Paid Network
- Trust Swap
These are the top six launch pads of crypto. Now let’s take a look at each Launchpad in detail.
Based on trading volumes, Binance is the most popular cryptocurrency exchange and the fastest-growing trading platform. Binance, which was founded in 2017, is a platform that is more than just a cryptocurrency exchange. Instead, as it builds a firm presence in the fastest-growing industry, it has evolved into a complete ecosystem for all types of crypto services.
Binance Launchpad is widely regarded as the first successful crypto launch-pad. Binance has generated millions of dollars for future and promising companies including BitTorrent, and PancakeSwap, Injective Protocol, thanks to its track record of successful enterprises.
Because the platform makes their IEO tokens available to the 13 million active users on the Binance exchange, projects powered by the Binance Launch pads have witnessed substantial increase in their numbers, reach, and success.
Binance Launchpad is more than simply a place to list tokens for sale; it also acts as a consulting service for prospective businesses. Binance’s experience and insights assist to streamline, motivate, and guide emerging crypto projects.
Binance ensures that projects have access to the greatest mentorship and marketing services possible, allowing them to focus on the project’s most important developmental and technological components.
It’s important to note that the projects posted on Binance Launchpad aren’t your typical projects. These projects have passed Binance’s stringent evaluation and verification processes, which assess whether the project meets the company’s high standards.
All that is required of users is that they complete their Binance verification requirements. Binance makes sure that tokens are sold in accordance with regulations.
Red Kite, a promising new entrant to the launch pad industry, is a platform that allows investors to engage in a transparent and secure token sale process by launching hand-picked companies. Poor marketing and investor fear of scams are the two main reasons why potential crypto companies can’t acquire enough funding. Since October 2020, Americans have lost a little over $80 million to crypto scams, a 1,000 percent increase over 2019. On the other hand, promising crypto projects are difficult to find by retail investors, which is one of the main reasons why they wind up investing in rug-pulls or exit scams, which have superior marketing and discovery. Unlike other crypto launch pads, the Red Kite Launchpad promises to alleviate these issues for investors and crypto businesses who are trying to attract funds with its unique strategy.
For Projects: RedKite has the community’s support, as well as influencers and marketing partners, to help you get your project in front of investors.
For Crypto Investors: All of the crypto projects on the Red Kite launch pad have been hand-picked and have undergone a thorough vetting procedure in order to boost investor confidence and protect their interests.
Red Kite aspires to be a more secure platform where investors may choose from hand-selected and approved companies without fear of a rug pull or an exit scam. This isn’t all; Red Kite’s launch pad has unique features that set it apart from the rest of the ecosystem’s players.
Red Kite comes with support for both Ethereum and BSC pools out of the box. It will soon support Polkadot and will be the first Polkadot launch pad with a variety of pool kinds and whitelist requirements.
Reputation & Tier – Price manipulation is one of the most serious issues in any token’s pre-sale phase. The Red Kite launch pad contains a tier-based reputation system that tracks and assigns reputation points to each participant. Any malevolent behavior will have an impact on the participant’s reputation as well as his ability to participate in future launches.
Sweep Processes – If you’ve ever participated in an ERC-20 token pre-sale, you’ve probably heard the term “gas war,” in which players bid higher gas prices to keep small investors out of the pre-sale. The Red Kite Launchpad has established a lane-based swap mechanism, which allows each member to join according to their tier.
The Red Kite launch pad now fully supports Coinbase Wallet and BSC Wallet, as well as Block pass for safe KYC. Red Kite is only getting started, and it plans to go beyond being a launch pad to provide a full suite of DeFi services in the future.
Because it overcomes key concerns with subscriptions, split payments, and cross-chain token swaps, Trust Swap is widely hailed as the development of Defi transactions. Trust Swap began as a trustless peer-to-peer escrow business, but as its vision grew, it extended to include some of the block chain’s most groundbreaking services in the DeFi ecosystem via smart contracts.
Trust Swap intends to encourage widespread use of DeFi goods by introducing Decentralized Subscription and Payment Models, cross-chain and multi-currency support, and trustless escrow and split payments using smart contracts.
Furthermore, Trust Swap continues to grow and contribute to the Trust Swap ecosystem by launching Trust Swap Launchpad, a native project launch pad. The Trust Swap launch pad is a full-service launch pad for new crypto projects looking to take advantage of security, and long-term viability.
Around its environment, Trust Swap has built a dedicated community. It allows users to acquire early access to promising crypto projects by staking a minimum of 4,000 SWAP tokens, the platform’s native asset.
Through its token lock-up mechanism, the Smart Launch toolset, Trust Swap hopes to prevent immediate sell-offs and rug-pulls after token launches. The Smart Launch toolkit is a fully customized and audited solution that keeps tokens locked up for the team, developers, and early adopters until a specific development milestone or waiting period is met. The Smart Launch approach provides reassurance to all parties, including funders and the project team, that no one will throw each other under the bus. Furthermore, with its decentralized split payment and escrow service, it holds the development team accountable to their community in terms of real results.
Trust Swap projects receive access to a variety of benefits, including large-scale publicity, community trust, marketing support, and visibility. Trust Swap has raised approximately $20 million in investment for numerous budding crypto projects since its launch in September 2020. Chain Games, Glitch Finance, SOTA, and BitCashpay are among these projects.
Polkastarter, which was founded in late 2020, is unquestionably one of the more recent entries to the list. Given that it has attracted over 200,000 eager investors, the Polkastarter platform has a lot of potential.
Polkastarter is a new decentralized exchange for token pools and auctions based on the Polkadot network. Polkastarter is a decentralized crowdfunding platform that helps early-stage crypto projects generate funds, expand their exposure, establish a loyal audience, and get access to the platform’s features.
Polkastarter is based on the Polkadot network, which is extremely compatible. It takes advantage of all of Polkadot’s capabilities, including Ethereum’s and other prominent crypto projects’ liquidity. The platform’s cross-chain development is responsible for a lot of its potential. Polkastarter is a platform that allows projects to create their own interoperable token pools.
Given the fact that prominent platforms like Ethereum and Bitcoin are still plagued by network congestion, the Polkadot ecosystem and the Polkastarter platform can be extremely rewarding and advantageous for new companies.
Polkastarter uses well-known auction mechanisms as sealed-bid auctions, Dutch auctions, and dynamic and fixed ratio swaps. Polkastarter also offers password-protected private pools, whitelisting, smart contract token swaps, and price notifications, all of which help it stand out as a unique platform for new projects.
The Polkastarter protocol is also completely decentralised. The platform is free and open-source, and it operates in a permission-less environment. This means that any developer may use Polkastarter’s basic infrastructure to construct and run fixed token auctions in their own project.
DuckDAO is a one-of-a-kind digital asset incubator backed by a passionate community. The decentralised incubator enables new initiatives to take advantage of the community’s investing power and buzz-generating potential in order to attain their full potential.
DuckDAO intends to democratize the early-stage investing sector in the crypto ecosystem in order to find and secure potentially lucrative investment opportunities for its community. When it comes to launch pads, DuckDAO’s model is unique. It functions as a decentralized venture capital investment platform in which users must acquire the platform’s DuckDAODime, commonly known as DDIM, in order to obtain access to new and upcoming ventures. Users who own the platform’s native tokens receive access to a number of exclusive groups where they may take advantage of exclusive offers. Because DuckDAO is run by its community, anyone can invest in early-stage crypto ventures and contribute to their development by assisting with user acquisition and marketing.
DuckDAO also wants to build long-term relationships with the projects it hosts on the platform. DuckDAO intends to engage with its associated projects from the start until they are listed on a cryptocurrency market. Projects can benefit from marketing, expert assistance, and a variety of listing services, all of which will undoubtedly aid in the project’s growth and success.
DuckDAO also intends to support hosted projects with various social media techniques, OTC sales, and community sales in order to ensure that they can expand in a healthy and natural way.
Despite the fact that Bitcoin was introduced more than a decade ago, there is still a lot of misinformation concerning its taxes. The cryptocurrency was designed to be a daily transaction medium, but it has failed to acquire popularity as a money. Meanwhile, it has grown popular with speculators and traders looking to profit from its volatility.
In its notice 2014-21, the Internal Revenue Service examined cryptocurrency transactions. Cryptocurrencies will be treated as an asset, similar to real estate, according to the agency. The Internal Revenue Service (IRS) began introducing a question on Form 1040 in 2019 to ascertain whether the taxpayer had any bitcoin transactions during the tax year.
Assets are subject to a variety of taxes depending on the type of transaction. However, due to Bitcoin’s unique qualities and use cases, there are a few exceptions.
Step – 5
Bitcoin has now been listed on exchanges and matched with major foreign currencies like the US dollar and the euro. When the US Treasury announced that bitcoin-related transactions and investments are not unlawful, it acknowledged bitcoin’s growing importance.
Here are some answers to frequently asked questions about Bitcoin taxation.
Do Bitcoin transactions necessitate the payment of taxes?
Yes, in a nutshell, to that question. The fact that bitcoin is classified as an asset clarifies its tax consequences. The IRS has made it mandatory for taxpayers to disclose all bitcoin transactions, regardless of their size. Every U.S. taxpayer is expected to retain a record of all Bitcoin purchases, sales, investments, and usage. In July 2019, the IRS sent warning letters to over 10,000 taxpayers who is suspected of “potentially failing to declare income and pay the resultant tax from virtual currency transactions, or did not disclose their transactions properly.”
Is it necessary for me to pay taxes if I get bitcoins in exchange for goods and services?
For tax purposes, salaries or payments received in cryptocurrency are classified as ordinary income. The price of the cryptocurrency on the day it was used to pay a salary is its value or cost basis.
Is it necessary for me to pay taxes as a Bitcoin miner?
Yes. Mining for cryptocurrencies is a taxable event. The coin’s fair market value, also known as its cost basis, is its price at the time you mined it. The good news is that you can deduct mining equipment and materials as a business expense. Depending on whether you mined cryptocurrency for personal or individual benefit, the nature of such deductions varies. If you operate a mining company, you can take advantage of tax deductions to lower your tax burden. These deductions, however, are not available if you mined cryptocurrency for personal gain.
When I convert from one cryptocurrency to another, do I have to pay taxes?
Some claim that converting one cryptocurrency to another, such as Bitcoin to Ether, should be classed as a like-kind transfer under the Internal Revenue Code’s Section 1031. The Internal Revenue Service (IRS) permits you to defer income tax on such transactions. During the early days of crypto trading, many crypto investors took use of this opportunity to delay their revenue from bitcoin trades. However, the IRS declared on June 18, 2021 in a Memorandum from the Office of Chief Counsel that such transfers do not qualify as a like-kind exchange under Section 1031.
What tax consequences come with donating, gifting, or inheriting cryptocurrencies?
Donations in cryptocurrency are handled similarly to monetary donations. They can be deducted from your taxes. Based on the market price at the time, an appraiser will assign a fair market value to the coin. On the price gain, the donor is not required to pay any taxes. Gifts of cryptocurrencies worth less than $15,000 are not taxed. If a recipient of a crypto gift worth more than $15,000 decides to sell it, their cost basis is the same as the donor’s. Crypto assets that are inherited are treated the same as regular assets, which means they are subject to the same estate restrictions.
What are some of the unique aspects of cryptocurrency taxes?
Bitcoin taxation and reporting are not as straightforward as they appear. For starters, bitcoin’s price volatility makes it difficult to assess the cryptocurrency’s fair worth in purchase and sale transactions. It’s also tough to figure out which accounting system is best for cryptocurrency taxation. Although Last in, First Out (LIFO) and Highest in, First Out (HIFO) have the potential to lower taxes, the IRS has only approved a handful cases of their use by crypto dealers. The most often used method for cryptocurrency accounting is first in, first out.
Step – 6
CoinMarketCap (CMC) is a well-known name in the cryptocurrency sector. Even today, breaking into the top-100 page of CMC is a source of pride for blockchain projects. CoinMarketCap introduced its crypto portfolio tracker mobile app earlier this year (May 2020). It’s a small, easy-to-use programme with a beautiful user interface. Needless to add, the app gets its information from the CMC website, which includes a database of over 2000 coins and 300 crypto exchanges. The market metrics for each currency are accompanied with a brief explanation and links to the project’s social media networks. The CMC app for iOS presently has over 10,000 evaluations from users in the United States.
The app includes historical coin price and volume data, market pairs, exchange statistics, and pretty much anything else that is viewable on the website. The app includes candlestick charts for coins, which are not yet available on the website. The Crypto Compare tab is a standout feature of the programme, allowing you to compare the performance of any two coins in terms of price, trading volume, and market cap over various time windows. There is also a separate section in the app for people who want to keep track of newly added coins.
Users can either create an account or go incognito, keeping their data locally without checking in. It is absolutely free to use the software. However, it comes at a cost: advertisements appear from time to time, which might become bothersome after a while. There are also sponsored links in the app that take you to Crypto.com to buy cryptos. Though the advertising is required to keep the software free for all users, they do detract from the overall experience.
Pros of CMC
The app gets 4.7 out of 5 stars on the App Store, with over 30k user ratings.
- Portfolio import from exchanges and wallets is automated.
- With candlestick charts and indicators, you can get real-time price updates.
- Diversification and gains/losses are examples of portfolio statistics.
- There were no user tracking or analytic solutions employed.
Cons of CMC
- There is now no support for Android smartphones, but it is on the horizon.
- There is no web-based version available.
Step – 7
Now let’s talk about crypto taxes. We understand that paying taxes on bitcoin and other cryptocurrencies can be perplexing. While we are unable to provide tax advice, we do want to make it easier to buy, sell, and use cryptocurrency.
There is a lot of contradictory information out there, but make no mistake: you must disclose gains and losses on each transaction or when you earn cryptocurrencies, even if the gain or loss isn’t significant. Whether or not you receive a tax form from a crypto exchange, you are responsible for reporting any income and transactions to the IRS. For this purpose, exchanges such as Coinbase make transaction history available.
Buying and selling cryptocurrency is taxable because the IRS considers cryptocurrency to be property rather than cash. As a result, tax regulations that apply to property (but not real estate) transactions, such as selling collectable coins or vintage automobiles with potential for appreciation, also apply to bitcoin, ethereum, and other cryptocurrencies. Cryptocurrency taxes are handled differently country-to-country.
For federal taxes, the cryptocurrency tax rate is the same as the capital gains tax rate. Short-term capital gains are taxed at 10-37 percent, while long-term capital gains are taxed at 0-20 percent in 2021. Crypto-asset profits in the United States are determined using two factors: your income and the length of time you have owned the coin (holding period).
Your holding period starts the day after you buy a cryptocurrency or conduct a cryptocurrency transaction and ends the day you trade, sell, or send that capital asset. This is where short-term and long-term capital gains enter the picture.
Long Term VS Short Term Crypto Taxes
The length of time you keep a capital asset like cryptocurrency can affect your tax liability. A short term sale is when you sell cryptocurrency after holding it for less than a year. It’s a long-term sale if you’ve held crypto for more than a year. Long-term gains are taxed at a reduced rate, making long-term investments attractive to intelligent investors.
The holding period begins the day after you receive an asset, according to the IRS’s bitcoin tax FAQ. A capital gain or loss is recognised when you have a taxable event, such as selling, trading, or spending money on goods and services. Short-term and long-term capital gains are reported separately on IRS Form 8949 on your tax return.
Tax software for cryptocurrency will compute your holding period for assets you sell or exchange, as well as estimate your outstanding taxes based on your tax rates.
Short Term Capital Gains
When you acquire, sell, or trade a crypto asset within a year, you have made a short term gain. Short-term profits are taxed at your marginal tax rate, which is the rate at which you pay taxes on your earnings.
Depending on where you live and how much money you make in a year, this rate can range from 0% to 50%. Find out what your rate of short-term capital gains is.
Long Term Capital Gains
When you buy and subsequently sell or trade a crypto asset after keeping it for a year or longer, you have made a long term gain. Long-term gains are taxed at a different rate, known as the capital gains rate.
There may potentially be extra state taxes in the future. If you’re in the top income category in New York, for example, the long-term total rate can be as high as 31.5 percent (20 percent + 11.5 percent New York state tax). Find out how much your long-term capital gain rate is.
Tax Forms for Crypto
There are two types of transactions of crypto that are taxable transactions and non-taxable taxations. To begin, determine whether you had any taxable transactions in 2020. A partial list of taxable and non-taxable bitcoin transactions is shown below.
If you didn’t have any taxable transactions, you don’t have to file anything related to cryptocurrency. Non-taxable transactions, such as receiving a gift, may prompt you to answer “Yes” to the virtual currency question on Form 1040: “Did you receive, sell, send, swap, or otherwise acquire any financial interest in any virtual currency at any time during 2020?”
Crypto Tax Software
Once you have all of the transaction data, you may reconcile your transfers, trades, and other transactions using cryptocurrency tax software to arrive at capital gains (or losses) and other revenue that has to be taxed. You could be underpaying or exceeding taxes if you don’t reconcile your accounts.
Taking a Loan VS Selling Crypto
If you’re a new crypto investor, you might be asking why Nexo’s credit lines are a better option than traditional loans or simply selling your crypto and spending the proceeds. This module will assist you in making that distinction and maximising your cryptocurrency.
Sell or Borrow
First and foremost, if you trust in your cryptocurrency’s long-term growth, borrowing against it is preferable to selling it since it allows you to access the value of your investment without giving up your assets and their potential for price growth.
Reason Behind Taking a Loan
What makes crypto credit superior to merely maintaining your cryptocurrency and taking out a traditional bank loan? There are four major benefits.
- Speed & Convenience
- Accessibility & Inclusivity
These major benefits will help you grow your earnings through crypto investments. Nexo offers a profitable crypto credit line that will help you decide whether you need to borrow/take a loan or sell your crypto.
Step – 8
A Quick Quiz
What are crypto Trend lines?
How to use trend lines for trading?
How can you read trend lines?
What do you about launch pads?
Which crypto launch pad you prefer? And why?
What do you know about crypto taxes?
Do you need to pay crypto taxes?