My understanding is that the reason for today's crypto crash is due to people finding out that they have to pay federal taxes on the money once they use it. So, that 40K that was made on the 10 dollar purchase would be taxed as soon as it was spent. At least that's what CNBC is giving as an explanation for the crash. Apparently, a lot of people didn't understand how complicated the tax laws are in regards to crypto. It's like buying a stock. You pay the tax once you sell the stock, assuming you made money on it. You only pay the capital gains rate if you held it for over a year, otherwise it's taxed the same an other income. OF course, that's just US tax rules. I have no idea how this works in other countries.
True, but I was given the impression that some of the Bitcoin investors weren't very sophisticated when it comes to investing. Or maybe they simply weren't thinking since crypto is imo, a rather weird and risky investment. Then again, so are stocks when you really think about it.