Economists to Develop BTC 'Equilibrium Price' Paper

Emiliano Pagnotta and Andrea Burasch have proposed a theoretical structure for networks based on proof of work, which include bitcoin and ethereum.
17 April 2018   1256

Two economists have developed a model for estimating the price of bitcoin and other assets in decentralized financial networks. This is reported by CoinDesk.

Emiliano Pagnotta and Andrea Buraschi, professors of finance at Imperial College London, presented a theoretical framework for evaluating networks using the Proof-of-Work consensus mechanism, including Bitcoin and Ethereum.

In their model, analysts use two main variables: the number of users representing the demand side, and the hash-rate of the miners representing the supply side.

The authors draw attention to the fact that decentralized financial networks are unique, since the crypto-currencies in them "simultaneously perform two functions". In addition to being an asset, they also encourage the miners to maintain the network. The equilibrium price of a crypto currency is a solution to a "fixed-point problem, characterized by the interaction of consumers and miners."

Researchers write that this problem has 2 solutions under any set of conditions, one of which is $ 0.

Indeed, if the price of bitcoin were zero, miners would not provide any resource to the network, and its trust would be zero. Consumers would derive no utility from the system and would not pay a positive price for bitcoins.
 

Emiliano Pagnotta and Andrea Buraschi

Professors of finance, Imperial College Business School in London,

But there is a place in this model for a positive equilibrium price. What that figure is depends on the network's hash rate, the expected number of future network users, and the value users place on the network's resistance to censorship, they argue.

According to Pagnotta and Buraschi, a change in regulation in China will have a greater impact on the cost of bitcoin than the same changes, for example, in the UK. Despite the fact that the number of bitcoin users in both countries is approximately the same, there are more miners in China, which means that the restriction of their activities will have a stronger impact on the hashrate and, consequently, the price.

Factor the authors did not take into account is "pure speculative motives," which arguably affected the price of bitcoin more than any other development in 2017.

Israeli BTC Investors to Face Catch 22

They need to pay taxes from Bitcoin investing in order to avoid their property arrest, but banks don't take their money due to AML issues
06 August 2019   132

Bitcoin investors in Israel are faced with the impossibility of paying taxes, as local banks refuse to accept funds received from the sale of cryptocurrencies because of the risks of money laundering and terrorist financing. About this writes the local edition of Haaretz on August 6.

Bitcoin is not recognized as a currency in Israel, therefore, individuals must pay 25% of the income from cryptocurrency trading to the treasury, and legal entities - 47%.

Investor Ron Gross told the publication that he acquired bitcoins in 2011 and reported his income to the tax office. In 2017, the bank that served Gross began to refuse to accept funds received from the sale of bitcoins. The investor met with representatives of the bank to demonstrate to them a 70-page history of bitcoin transactions as confirmation of the origin of the funds, but failed to convince them.

The tax authority is aware of the problem, but they say the ball isn’t in their courts. I’ve tried working with almost all the banks, but the minute they hear the word ‘Bitcoin’ they freeze up.
 

Ron Gross

Bitcoin investor from Israel

 

Since Gross was unable to pay taxes on time, his bank account, home, and even scooters were arrested. According to the investor, the tax authorities know about the problem, but can do nothing.

According to Haaretz, the tax office is aware of $ 86 million in unpaid taxes on income from cryptocurrency trading. It is possible that the real amount may be significantly higher.

Roy Arav, another Bitcoin investor, kept the proceeds from trading Bitcoin in an account with Israeli bank Discount under the control of the Bit2C exchange. The bank refuses to transfer money to Arava’s personal account under the pretext that its politicians forbid it to transfer funds related to virtual assets to client accounts due to the risks of money laundering and terrorist financing.

Arav also could not pay taxes and was forced to sue the bank. According to the investor, the authorities entered his position and granted him a deferral of time for the consideration of the claim.