It is time to ask ourselves 'are crypto bubbles bursting?'.

The rise of [Bitcoin](/coins/btc) (BTC -0.62%), [Ethereum](/coins/eth) (ETH -1.23%),[ Dogecoin](/coins/doge) (DOGE 4.64%), and some other digital currencies has prepared the way for once-in-a-lifetime profits. For example, when Bitcoin topped $64,800 a token in mid-April, a $155 investment at $1 would have been worth nearly $1 million.

However, cryptocurrency has plummeted in value during the last two weeks. Some could call this a natural retracement following a monster run upward. Still, I'd like to refer to it as a popping bubble.

While many people feel that digital currencies are the best thing since the invention of chocolate, I believe the crypto market is collapsing for several reasons.

## Some Governments Aren't Okay with Cryptocurrency

The crypto bubble is bursting because some countries are concerned about cryptocurrencies undermining their central bank-backed currencies. For example, China sent the cryptocurrency market into a tailspin last week when it announced that its banks and online payment channels would no longer be able to provide any cryptocurrency-related services.

However, it's worth noting that a significant amount of Bitcoin mining occurs in China. In this regard, China is far from alone. For example, Turkey recently passed legislation prohibiting the use of cryptocurrency for payment. Meanwhile, digital currencies are illegal in Bolivia, Ecuador, Nigeria, and Algeria. As a result of this trend, the global use case for cryptocurrency is becoming increasingly unlikely.

## Centralisation is Still an Issue

One of the goals of cryptocurrencies is decentralisation. This was done to ensure that a network is not controlled by a single person or a small group. However, according to BitInfoCharts.com, ownership of Bitcoin and Dogecoin is relatively consolidated. For example, only 2,155 addresses control roughly 42% of all Bitcoin, and only 99 addresses control 66.6% of Dogecoin. As a result, people may recognize that these financial experiments aren't as decentralized as they should be.

## The Real-World Utility is Minimal

A severe drawback of digital currency is that it is practically useless outside of a cryptocurrency exchange. Even though many well-known corporations or organisations have accepted Bitcoin or Dogecoin, the total number of businesses accepting either is still insignificant.

## There is No Entry Barrier

My main issue with cryptocurrency, aside from its lack of utility, is that there is no entry barrier. Anyone with a computer or an innate desire to code can create a blockchain and, possibly, a tethered token. [CoinMarketCap](https://coinmarketcap.com/) claims to have a database of around 10,000 different cryptocurrencies. While many aren't actively traded, the number of potential competitors to Bitcoin, Dogecoin, and Ethereum is staggering, with many more on the way. In short, the crypto sector is constantly being diluted by an infinite number of competitors.

## There is No Identifiable Real-World Correlation

Another concern with crypto is that there are no obvious real-world correlations. For example, we know that gold and the US dollar have an inverse relationship. Gold is more likely to rise when the value of the dollar falls. This is a long-term relationship that has formed.

Bitcoin, Ethereum, and Dogecoin do not have these correlations. Crypto enthusiasts want to emphasize how crypto is a hedge against inflation. Still, they forget that the value of Bitcoin has fluctuated depending on how quickly or slowly the money supply expanded. Because cryptocurrency has no physical connections, it is fueled by emotion and technical analysis.

## Over Leveraging Can Be Haunting the Crypto Market

Customers at some of the most well-known cryptocurrency exchanges will be able to multiply their account equity by 50 to 125 times. While this level of leverage is common in forex, where currencies move in fractions of a cent, it is absurd for cryptocurrency, which can swing 3% in seconds. According to data from Bybt.com via Bloomberg, approximately 887,000 accounts representing $9.4 billion in total crypto assets were liquidated on May 19 due to leverage-based margin calls. It doesn't take much for the crypto market to go south rapidly because of this tremendous leverage.

## Investors Always Overhype New Tech

Finally, investors usually overestimate new technology uptake. Even though many people are enthusiastic about blockchain, it has been more than a half-decade, and the euphoria has yet to translate into actual enterprise use. Every next big-thing technology, including cryptocurrency, requires time to mature.


Are Crypto Bubbles Bursting? They May Be...

In recent years, cryptocurrency assets have grown in popularity in the tax world and piqued the interest of investors and industry regulators, but what exactly are the crypto tax UK rules?

As the industry around cryptocurrency rapidly evolves, the tax situation has become more complicated. The emergence of distinct and complex cryptocurrency platforms, such as gaming and gambling platforms, and the evolution of non-fungible tokens and hybrid tokens for specific purposes have altered the asset class.

There may be the opportunity to take advantage of more favorable tax rules if you are not resident or domiciled in the UK for tax purposes.
What are the regulations on paying taxes on the crypto asset?

Cryptocurrency (or crypto assets) are electronic currencies that can be transferred, stored, and traded. Ideally, it is almost impossible to counterfeit or double-spend on cryptocurrencies. This is due to their technologically advanced nature, secured by cryptography. Furthermore, the emergence of new technologies has enabled the creation of crypto assets in various forms.

Who is responsible for paying taxes on crypto assets? The short answer is that anyone who lives in the UK and owns crypto assets may be subject to taxation. Current regulations deem you liable to pay tax when you trade, mine, receive as payment, receive as an airdrop in place of a service (or expected service), or exchange for any crypto asset.

Let's take a look at the various taxes you may be required to pay when trading, disposing of, or exchanging any crypto assets:

## Income Tax

Occupation is a factor when [HMRC](https://www.gov.uk/government/organisations/hm-revenue-customs) decides how to tax crypto assets. For example, if the holder happens to be a trader, their trading profits will be subject to Income Tax. If the activity is considered professional trading, Income Tax takes precedence over Capital Gains Tax and applies to general profits and losses.

## Capital Gains Tax

Whether you traded, sold, or exchanged any crypto assets, you will almost certainly be required to pay Capital Gains Tax (CGT). You may also be subject to CGT if you use your cryptocurrency to pay for services or goods. Cryptoassets will be taxed at the Capital Gains rate of 20% for those classified as higher or additional rate taxpayers. On the other hand, basic rate taxpayers will be taxed differently, and the rate charged will be determined by one's taxable income.

## Inheritance Tax

Inheritance Tax may be due upon death when dealing with crypto assets. Therefore, Inheritance Tax planning should be considered.

In conclusion, crypto assets are a prime example of how much the tax world has evolved and how new technologies influence day-to-day industry operations. Therefore, as a trader, investor, or industry regulator, you must understand what crypto assets are and the implications of their use.

Cryptoassets are a valuable new type of investment vehicle, and the UK Government has a vested interest in taxing crypto trading profits. Unfortunately, because the technology is still relatively new, HMRC has not had sufficient time to catch up fully. As a result, there are several loopholes and blind spots in UK tax law that make it unclear how certain crypto assets should be treated. If you trade crypto, you would be well advised to consult a tax professional.

For more Business & Markets news, see [here](/news/category/crypto-business-news).


Latest Moni

Author: Shelly Kay

Author: Shelly Kay | Page 2

Are Crypto Bubbles Bursting? They May Be...

Crypto Tax UK: A Comprehensive Guide

Dash or Litecoin? Crypto Comparison

How to Buy Altcoins

BTT Crypto: BitTorrent Token Price