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PaperclipPerfector  3mo ago (text post)   3549 thread views

Small-Scale Question Sunday for June 2, 2024

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Welp. I found my password for a very old btc wallet from 2013. It contains more than I thought. Nothing life changing, but a significant chunk of change.

What do I do with it? I just opened the wallet file with multibit classic. Where should I transfer the balance to secure it better? Hardware wallet or something?

How do I explain this to my country's tax administration?

You shouldn't need to explain anything until you sell it, unless your country has some kind of asset reporting requirement. Like Fuck said spending it directly in small chunks is probably safest.

We do have an asset reporting requirement for any and all crypto. Probably related to our wealth tax.

Buying any goods or services with crypto must be reported for taxation too. The amount used for the purchase would get over 20% gains tax on it.

Not sure what I could spend it on anyhow without risking being discovered, if I were to try to keep it secret. But I'm a perfectly law-abiding citizen. Yup.

First: Congrats, it's awesome to hear about someone recovering a cold wallet like this. I still love telling the story of my friend who frittered away 100 BTC from around 2011 before its biggest jump.

Second, how sure are you that you want to report all of this to the tax administration? If the amount was less than six figures, I would try to purchase goods in BTC slowly over the years.

Thanks!

Hypothetically, what goods could I buy with it without running afoul of some KYC or other reporting?

Could probably use a decentralized exchange of some sort to swap it into stables and then various ways of getting it into physical USD.

Stables? Stablecoins?

Physical USD won't help me.

And how could I trust the exchange? One of them just disappeared and stole my coins once.

A decentralized exchange is relatively low-trust since you just use it to convert and don't deposit. Uniswap the most popular example.

How would physical cash not assist? Likely easier to slowly convert that into your preferred currency than raw BTC

My country doesn't really use cash anymore. I wouldn't be able to spend it all without raising suspicion.

I think we're running into confusion about what a "not a life-changing amount" actually means. Can you get rid of 5 figures in cash eventually?

Foreign purchases under the customs limit are always a safe bet for using coins, it seems like.

We don't have a customs limit for foreign purchases, everything gets a hefty VAT and a declaration fee. Spending it in cash would take a very long time.

I'm gonna go the "just tax my crypto when I sell" route.

More comments

I'm not an expert in this space by any means - I divested of crypto precisely because of the additional controls that landed on "easy" platforms, since someone not watching and taxing my transactions was a major part of the appeal.

I think it would depend a lot on where you live. I'd create a plan with multiple types of goods and the laws around selling your own personal property (imagine my eyes rolling here).

At the end of it, you may find the juice isn't worth the squeeze, and that's a valid answer. There's a reason why the people who are best at tax minimization strategies are generally dealing with 7+ figures. If it's a huge PITA to keep your own money, you may end up just choosing to cede it through taxes. After all, that's what these systems of punishment and enforcement are designed to do....

Right. I'm gonna stay on the straight and narrow.

Transferring the coins to a cold wallet is a good start. Write down multiple copies of the seed phrases and passwords and store them in multiple safe and accessible places.

Will I lose out on my Bitcoin Cash if I just transfer the BTC from my ancient wallet to a new one? My old one doesn't even have a seed phrase, so it seems important to get a more modern one. Might order a Ledger Nano X or Nano S Plus...

Will I lose out on my Bitcoin Cash if I just transfer the BTC from my ancient wallet to a new one?

BTC Cash and BTC are different cryptocurrencies. If you buy a new wallet that supports both, I can't imagine you losing anything.

My old one doesn't even have a seed phrase, so it seems important to get a more modern one. Might order a Ledger Nano X or Nano S Plus...

I recommend Ledger. I've had one of their cold wallets for years without issue.

Yeah but I'm talking about the fork issue. My btc are from pre-fork days. When the fork happened, those who had btc were given a corresponding amount of bitcoin cash and some other forked-off coins too, but they're sort of glued together with the btc.

Hardware wallets - what do they actually give you that a written down seed phrase + password wouldn't?

As I remember from the bcash fork back in the day, you should basically just have a wallet which works on both the bitcoin and bcash chains.

Like if you import your private key into a modern client that supports bcash, you should just see a balance there that you can move to an exchange and sell.

Yup. That's still the case. I was able to claim my bch.

If you live in the USA, you should contact an enrolled agent, or CPA or attorney specializing in tax, to figure out how to report this to the IRS. In other countries it’s probably a just a lawyer.

I don't know what the procedure is for accessing it but if your btc is unmoved since 2013 then it's pre the chain fork and you'll have the same balance in btc-cash and the various other forks that probably sank without trace.

What do you mean? Please elaborate.

Around 2015/16 Bitcoin forked into Bitcoin (BTC) and Bitcoin Cash (BCH) as a result of different views over how large the blocks in the blockchain should be.

They did this by creating a fork in the blockchain where, after the date of the fork, all the transactions on one chain would be incompatible on the other chain. So if you bought BCH you could transact on the BCH chain, but not on the BTC chain, and vice versa.

However the blockchain prior to the fork is the exact same ledger for both BTC and BCH. So if you had a balance of 1 "coin" on the BTC ledger before the fork then after the fork you'll have a balance of 1 coin on the BTC ledger and a balance of 1 coin on the BCH ledger too, because it references the same transaction history. I hope that makes sense.

The upshot is that if you have a BTC balance from prior to the fork you have the same balance on all the chains that have forked from that same ledger.

Last time I looked, which was quite a while ago, BCH was worth about 1/10 of BTC, but BTC had gone up at least 10x so it's worth following up. You'd need to read up on the proper procedure to do it though because if you send your pre-fork BTC to someone without splitting the BCH out first you're essentially sending them both. I'm about at the limit of my hazy, hungover, half-remembered knowledge at this point.

There were a bunch of other chain splits, from the seemingly more serious minded ones like Bitcoin Satoshi's Vision (BSV) through to the more scammy looking ones that seemed to be just riding the brand name through the crypto hype wave, like Bitcoin Diamond (current value 7 cents). I think BSV forked from BCH, so the same principle applies there.

TLDR It's complicated and you should do some thorough research on before moving your coins. Many of the forked chains are practically worthless but a few of them, while worth less than BTC, are still worth a good bit of money on account of how much the whole market has risen since the date of the fork.

Here's an old article about one of the forks that explains it better and might offer some terms to search https://bitcoinmagazine.com/technical/beginners-guide-surviving-coin-split. Looks like searching "Bitcoin split" tends to return results about Bitcoin's regular mining reward halving which is totally different. Hope that helps you get started, my information is hugely incomplete and possibly wildly out of date!

Thanks for the reply.

BCH isn't worth much now. $461 for each. Probably worth bothering with for me, but the other forks seem to be worth much less.

Wikipedia: The following is a list of notable hard forks splitting bitcoin by date and/or block:

Bitcoin Cash: Forked at block 478558, 1 August 2017, for each bitcoin (BTC), an owner got 1 Bitcoin Cash (BCH)
    Bitcoin SV: Forked at block 556766, 15 November 2018, for each Bitcoin Cash (BCH), an owner got 1 Bitcoin SV (BSV).
    eCash: Forked at block 661648, 15 November 2020, for each Bitcoin Cash (BCH), an owner got 1,000,000 eCash (XEC).
Bitcoin Gold: Forked at block 491407, 24 October 2017, for each bitcoin (BTC), an owner got 1 Bitcoin Gold (BTG)*

For me, eCash, Bitcoin SV and Bitcoin Gold are probably not worth bothering with, unless it's easy. And I don't know if I got any Bitcoin SV or eCash, considering I didn't "claim" my Bitcoin Cash or whatever beforehand; not sure how that works. My Bitcoin Cash, I'd probably want to bother with getting, unless I have to risk my BTC balance in the process.

Not sure how I'm gonna do all this though. I don't even have a seed/recovery phrase. Just a multibit wallet.

The above isn't really right. If you owned Bitcoin before the Cash split, then you own the Cash as well, no actions post-split on the regular Bitcoin blockchain can affect it at all. To access it, you need to get a Bitcoin Cash wallet. You should be able to get a Cash variant of whichever Bitcoin app you are using and initialize it with the same key info that app is using.

If you're not into Cryptocurrency speculation, the simplest thing to do with it is send the Cash to an exchange that supports it, exchange it for regular Bitcoin, and send that Bitcoin back to your local wallet. Or set up a new Bitcoin wallet with the latest stuff, send your regular Bitcoin from the old wallet to that, as well as the Bitcoin you exchanged the Cash for.

I'm not a lawyer anywhere and have no idea what country you're in, so I have no idea what the legal or tax implications of doing this are. In a public forum and in the absence of any more detailed information, I can only suggest that you consult with a local lawyer and follow the law.

Yeah, thanks. I was able to claim my bch through importing the key into Electron Cash (after transferring the btc out to a more secure new wallet first).

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