I want to get this post out there sooner rather than later.
Someone asked me my thoughts on Cryptocurrency when it was beginning to emerge as an investment. I told him that in my view Crypto was a range of unregulated currencies in which you invest or seek to trade. A set of volatile currencies in which people invest and speculate on growth. If you are serious you can even get into mining. Mining is the process that Bitcoin and several other cryptocurrencies use to generate new coins and verify new transactions. I asked him if he was experienced in FOREX trading? He said no and I said leave it alone mate.
That was many years ago and we all have the benefit of hindsight. But are we looking back? I dont think so, and the evidence is that there are over 1 million Aussies dabbling in Crypto, so I thought I would have a closer look. This is my story.
I was playing Solitaire (or Sudoko) on my phone (yes I know, very sedentary) and this ad came up for Bitcoin AI 360 software that purported to make investing in crypto a breeze. My attempts to get rid of it were fruitless, so I clicked on more information and read through the advertising. It looked credible and easy to use, so I continued my research on the web. Many reviewing organisations and individuals gave it the thumbs up as a viable piece of software to get started in crypto investment. It also had a demo which enabled virtutal funding and testing before you lodged funds for trading. The package was used internationally. All seemed rigi didge so I set up an account as to proceed further, this was required. I gave email, phone and address. No other detail.
Within 5 minutes I had a call from an Aussie sounding guy, who said he was from Omexbanc. I also received a welcome email offering assistance to fund my account via a credit or debit card. I ignored the email and gave no further information.
I said to this guy, so you are a bank right? He said no sir, we are a forex broker, who has been allocated to assist you in commencing your trading. I said are you registered in Australia. He said he was calling from Canberra. Red Flag. Why would a FOREX broker be based in Canberra?
I continued to receive marketing emails and even had a call from his boss, assuring me that once I placed $360 into my ‘wallet’, I could start trading and use the demo software if I wish. (He sounded sus but I played along) I said I am not ready to fund the account and I would get back to them when I was. You see my interest here was not to fund the account but to investigate crypto.
After receiving multiple calls and emails, I could sense that something must not be right, so I dug deeper into the web. Then bingo. I came across some bad press for these guys, courtesy of HackMD who said and that I publish because this is in the public domain
‘Omexbanc.com is a fraudulent online foreign exchange (forex) broker that has been accused of scamming people in the name of forex trading. It is not authorised by any regulatory body, and its reviews on various websites have been overwhelmingly negative. The company does not appear to have any valid license or authorization to carry out its services, making it an unreliable choice for traders. Omexbanc promises high returns on investments but instead fails to even return deposits made by customers, leaving them with huge losses. There are also reports of account manipulation, resulting in massive losses due to market movements that were outside the control of the customer. Omexbanc has been accused of using fake positive reviews to increase its credibility. This seems to be a common tactic used by fraudsters, as they create false accounts and fill them with glowing testimonials in an attempt to lure unsuspecting victims into their schemes. Furthermore, the company often uses aggressive and misleading marketing tactics, such as offering bonuses or special deals that do not exist. The best way to protect yourself from being scammed by Omexbanc is to avoid investing money with them at all costs, and instead seek out more reputable brokers who are regulated by regulatory bodies in order to ensure your safety. Additionally, it’s important to always read customer reviews carefully before deciding whether or not a particular broker is trustworthy. If the majority of reviews sound too good to be true, it’s likely a sign that they are fake and should be avoided. Omexbanc is an untrustworthy forex broker with a long history of scamming its customers out of their hard-earned money. It uses deceptive marketing tactics and fake positive reviews in order to attract unwitting investors into its scheme. The best way to protect yourself from being scammed by them is to stay away from them and seek out more reputable brokers who are regulated by regulatory bodies. By doing this, you can make sure your investments are safe and secure’
I gave them a copy of this and told them not to contact me again. Their defence was that even Apple, Microsoft and Amazon get bad reviews..Please.
So, not to be deterred, I thought I would take HackMD’s advice and I did further research on the best FOREX traders in Australia, and who had good software for beginners. This proved to be a lottery until I finally came up with Swyftx. I have seen their ads on TV, so they must be OK.
To my surprize, they look alright, and they are listed on ASX. I opened an account with the same information given to Omexbanc. I had to verify my ID using my Drivers Licence. All good and I was in using their demo software with $10,000 of virtual cash. I invested $1,000 in Bitcoin and another $1,000 in Ethereum. After 24 hrs my virtual investment had dropped across both currencies 2.5%. At last read I was in the black again and forging ahead. The Fed. released its February minutes!
My observation here is that Bitcoin (BTC) and Ethereum tend to mimmick the share market with rise and falls in value. The alternative lesser currencies (Alts) are similar but with larger rises and falls.
Now I know that the name of the game here is to trade, and the broker takes .6%. I have no issue with that, but I just want to see what happens over the next few weeks as I buy other currencies and respond to buy/sell opportunities. (with my virtual cash)
Somehow I feel much safer dealing with an ASX listed company, that is Australian owned. Maybe that is naive, but my bravado has been dented to a point that my virtual cash seems real to me and I would like to know how it will grow.
I will keep you informed of my progress.
Tax implications of Crypto trading
The ATO considers Crypto an asset and the buy/sell tansactions are a CGT event that will lead to a capital gain or loss. If you sell a currency withing 12 months of purchase there is a capital gain realised on the gain which is the difference between the sales value less brokerage, and the purchase cost plus brokerage. You pay tax on 100% of the net gain at your marginal tax rate.
So its the same tax treatment as for a shares, or other investments.
The only way to reduce the tax hit is to hold the currency for 12 months. An individual or a trust can discount the gain by 50%. i.e. you will be taxed on 50% of the gain, not 100%. This suits many crypto investors.
Now this poses a problem if you are buying and selling currency throughout the year and therefore you have multiple trades. This is streamlined by software that many brokers use to calculate net losses or gains through the year and a report is available to facilitate the tax return. In fact they use this information to meet their obligations of regulation including reporting to the ATO. Make sure that your tax return is filed correctly.
You can be classed as a trader (rules apply) and claim all costs of your trading business in the year end accounts. If you are a trader, your profits or losses are not a capital transactions and therefore a discount is not available. The net profit or loss is added to or deducted from your assessable income. i.e you pay tax on the annual profit from trading.
I am investigating the completeness of broker software as used within Swyftx. I will let readers know the outcome. If you dont already have software, be sure to keep track of all trades.
Well thats it for Cryptocurrency for now.
My conclusion from my ongoing investigation into Crypto is that
go in with a wise head and eyes wide open like you are buying speculative shares
chose a broker who is regulated in Australia
invest only what you are prepared to lose
keep track of trades for tax purposes
beware of the scammers and unscrupulous brokers
these are currencies with no country behind them, no asset backing, and which could collapse at any time…take your profits and pay your taxes