Roubini: 10% spike in BTC occurred hours before the Fidelity announcement: so there was clear insider trading and/or exchanges that were front-running their clients. In any other market the SEC would investigate & folks would end up in jail. Not in this crypto cesspool of manipulation
The Market Cap of the crypto saw an #expansion to $240 billion after 24 hours of #trading as it was powered by the rise of the Bitcoin to the $8000 level. In addition to the bitcoin, the healthy performance of altcoins also helped strengthen the #market cap to this new high.
Hi all. Been away from this one for quite some time now. Still have ~14k coins parked in an out of date wallet somewhere. But was catching up with some of the older coins I still hold bags of as I still have some belief in them. This being one of them. By far the biggest (in terms of coin quantity anyway) of them as it happens. But looking on CMC, it no longer shows a single exchange or trading pair for GRC?!?!? I had a quick look back through posts on here and did find one reference to a market on one called "southxchange" (never heard of it) but their site doesn't seem to work very well. Incredibly slow to load. Fails to load quite often. And when I did get in and tried to look at the BCH/GRC pair (the only one that came up for GRC) it never loads the page. Click on it and it just constantly tried to reload itself and never gets anywhere. After a first experience like that, it's not an exchange I would ever use. So where, if anywhere, are GRC being traded or used these days? I mean, without any market activity or utilization, GRC itself becomes little more than a souvineer of running BOINC. All of which is very sad. The protocol has so much potential to do good and be worth something. :(
INFINITECOIN missing for past several hours. Was ready to trade then buy Doge but it was halted and pulled. Shows in my dash but markets are gone. Issues like these are what concerns me about crypto and how fair the exchanges are in regards to blocking trades at will.
The 4th way of algorithmic trading (Signal Processing)
Algorithmic trading types classified based on development perspectives: 1) Technical Analysis 2) Statistics and Probability 3) Machine Learning I took a different path which is not discussed widely in this subreddit. 4) Signal Processing I'm not a good storyteller, but this is my journey and advices for the beginners First, my background: - Electrical and Electronic engineer, - Software developer (20+ years) - Trader (5+ years) - Algorithmic trader (3+ years)
How I Found The Alpha:
Before algorithmic trading, I was somehow profitable tradeinvestor. Like most of you, when I began to algorithmic trading, I tried to find magic combination of technical indicators and parameters. Also I threw OHLCV and indicators data into the RNN for prediction. I saw that, even very simple strategies like famous moving average crossover is profitable under right market conditions with correct parameters. But you must watch it carefully and if you fell it is not working anymore, you must shut it down. It means you must be experienced trader to take care of your algorithm. I am a fulltime software developer, algorithmic trading was my side project also it became my hobby. I tried to learn everything about this industry. I watched and listened hundreds of hours of podcasts and videos in all my free time like commuting from home to work. These are the most useful to me: - Chat with traders: https://www.youtube.com/channel/UCdnzT5Tl6pAkATOiDsPhqcg - Top traders unplugged: https://www.youtube.com/usetoptraderslive - Ukspreadbetting: https://www.youtube.com/channel/UCnKPQUoCRb1Vu-qWwWituGQ Also I read plenty of academic papers, blog posts and this subreddit for inspiration. Inspiration came from my field, electronics. I will not give you much detail about it but I have developed a novel signal processing technique. It is a fast and natural technique which I couldn’t find any article or paper which mention this method. It can transform any interval price data into meaningful, tradable form. The best part is, it doesn't require any parameter and it adapts to changing market conditions intrinsically. These are the concepts that inspire me: - Information Theory: https://en.wikipedia.org/wiki/Information_theory - Signal Processing: https://en.wikipedia.org/wiki/Signal_processing - ADC: https://en.wikipedia.org/wiki/Analog-to-digital_converter
Output of the process can be used to develop endless type of profitable strategies. I made some money with different momentum based strategies while thinking about how I can use this technique more efficiently. I like to combine different fields. I think trading and life itself have many things in common. So beside general trading concepts, I think that I can try to implement concepts of the life. Also because of the parameterless design, it's more like a decision making process than an optimization problem. I searched proverbs and advices for better decision making. I handled them one by one and thought how I could implement them in a unified strategy while preserving the parameterless design. In time, this process was significantly improved stability and reliability while it was evolving from momentum to mean reversion. These are some proverbs which I use them at various aspects of the algorithm:
- “The bamboo that bends is stronger than the oak that resists.” (Japanese proverb) - "When the rainwater rises and descends down to where you want to cross, wait until it settles." (Sun-Tzu) - "If you do not expect the unexpected you will not find it, for it is not to be reached by search or trail" (Heraclitus)
If you wonder how I implement them in the code, think about the last one; how do you define the unexpected, how to wait for it and how to prepare your algorithm to generate profit. By the way, I strongly recommend: The Art of War (Sun-Tzu)
I have plenty of ideas waiting to be tested and problems that need to be solved. Nevertheless these are the some of the backtest results, for the time being: Crypto: - Market fee and spread are considered, slippage is not. - For multiple assets testing; Survivorship bias was attempted to be eliminated using historical market rank of the assets. Data is acquired from coinmarketcap.com weekly report. ETH / BTC BNB / BTC Binance Historical Top 100 / BTC Other Markets: My main focus is crypto trading. But all the improvements are cross checked in different markets and intervals and validated empirically and logically. It can’t beat every asset and every interval but it tends to work profitably across them. https://preview.redd.it/l865fw6mjfd51.png?width=900&format=png&auto=webp&s=ff217d35637b41e26db8d7cfc3df14c3fb7ec14e Live: The algorithm is running live for over 1.5 years with evolving strategies I mention before. The last one is running for months.
Warnings and Advices:
- Bugs: A few months ago, before bedtime, I released new version for fixing small cosmetic bug and gone to sleep. When I woke up, I saw that nearly 40% of my account wiped out in a few hours. Instead of live settings, I published test settings. It was very painful. I have been coding since childhood, so everyone must be careful. I recommend, implement hard limit for stopping the algorithm. - Fully Automatic Strategy: Finding an edge is not enough. If you need fully automated trading system, you need a portfolio manager (a lot of research is going on at this field) and especially an asset selector mechanism which is maybe more important than the edge itself. If your algorithm is not be able to select which assets to trade, you must select manually. It's not an easy task and it's prone to error. I was very lucky with that: A mechanism already contained in the algorithm was used to rank and select the assets based on their momentums. - Fee-Spread: Because of the market fee and spread, trading is a negative sum game. Do not ignore it when backtesting your algorithm. - Slippage: It's really a problem for low volume assets like penny stocks and lower market cap crypto currencies. Stay away from them or play with small capital or find a way to determine how much money you can use. - Latency: Don’t think it's a HFT only problem. If your algorithm synchronize multiple assets data from the market and run calculations before sending order back to the market, you lose significant amount of time. This usually causes losses that you have not considered before, especially in a volatile environment. Also if you want to develop realtime strategy, you must seriously consider what you will do in downtime. - Datasource: This is the most important part for preparation before developing you strategy. If you don’t have good, reliable data; you cannot develop a good strategy. For free data for various market; I suggest investing.com, but you should consider that volume data is not provided. For crypto, all of the exchanges provide their real data for any asset and any interval, you can use them freely. Also you can buy data , especially if you want intraday data, but I can't suggest any because I never tested them. - Biases: Before developing algorithm, please take a look at and understand the common biases like: Survivorship bias, Look-ahead bias, Time period bias. Or you can be sure that you will face them when you go live. - Live trading: When you think your algorithm can make money, don’t wait till perfection. Go live as soon as possible with small capital to wake up from your dreams and face with the facts early. - Psychology: If your education is based on STEM and you don’t have trading experience, it’s not easy in the real world to swallow all those ups and downs that you see in minutes during backtest. It can affect your mood and your life much more than you think. I suggest, work with a professional trader or only invest what you can really afford to lose.
After over 3 years of journey, I have a profitable algorithm that I trust. I was supposed to lie on the beach and drink beer while my algorithm printing money. But I am consistently checking it’s health and I have always things to do like all software development projects. I posted some of the backtest results, but I don’t know are they considered P/L Porn or not. If so, I can remove it. Sorry about mysterious parts of this post. I removed some parts unwillingly before posting, but there is really a thin line between giving away your edge freely (also it means loosing it) and inspiring people to find their own way.
“Non est ad astra mollis e terris via" - Seneca
For those engineers and EE students who are bombing my inbox for guessing what I did; I can not write all of you in private, also I want to explain it publicly. I must say, you are on the wrong way. If I open sourced the signal processing part, probably it doesnt mean anything to you and you can not turn it into a profitable algorithm. I have to clarify that; before I developed the technique, I knew what I am looking for exactly. Signal processing is not magically trading the market, I am trading the market. it's just a tool to do what is in my mind near perfectly. Also proverbs are the way of thinking. I read them and think if it means anything for trading. Lastly watch the Kung Fu Panda :) https://www.youtube.com/watch?v=rHvCQEr_ETk
You've probably been hearing a lot about Bitcoin recently and are wondering what's the big deal? Most of your questions should be answered by the resources below but if you have additional questions feel free to ask them in the comments. It all started with the release of the release of Satoshi Nakamoto's whitepaper however that will probably go over the head of most readers so we recommend the following videos for a good starting point for understanding how bitcoin works and a little about its long term potential:
Limited Supply - There will only ever be 21,000,000 bitcoins created and they are issued in a predictable fashion, you can view the inflation schedule here. Once they are all issued Bitcoin will be truly deflationary. The halving countdown can be found here.
Open source - Bitcoin code is fully auditable. You can read the source code yourself here.
Accountable - The public ledger is transparent, all transactions are seen by everyone.
Decentralized - Bitcoin is globally distributed across thousands of nodes with no single point of failure and as such can't be shut down similar to how Bittorrent works. You can even run a node on a Raspberry Pi.
Censorship resistant - No one can prevent you from interacting with the bitcoin network and no one can censor, alter or block transactions that they disagree with, see Operation Chokepoint.
Push system - There are no chargebacks in bitcoin because only the person who owns the address where the bitcoins reside has the authority to move them.
Low fee scaling - On chain transaction fees depend on network demand and how much priority you wish to assign to the transaction. Most wallets calculate on chain fees automatically but you can view current fees here and mempool activity here. On chain fees may rise occasionally due to network demand, however instant micropayments that do not require confirmations are happening via the Lightning Network, a second layer scaling solution currently rolling out on the Bitcoin mainnet.
Borderless - No country can stop it from going in/out, even in areas currently unserved by traditional banking as the ledger is globally distributed.
Portable - Bitcoins are digital so they are easier to move than cash or gold. They can even be transported by simply memorizing a string of words for wallet recovery (while cool this method is generally not recommended due to potential for insecure key generation by inexperienced users. Hardware wallets are the preferred method for new users due to ease of use and additional security).
Bitcoin.org and BuyBitcoinWorldwide.com are helpful sites for beginners. You can buy or sell any amount of bitcoin (even just a few dollars worth) and there are several easy methods to purchase bitcoin with cash, credit card or bank transfer. Some of the more popular resources are below, also check out the bitcoinity exchange resources for a larger list of options for purchases.
Here is a listing of local ATMs. If you would like your paycheck automatically converted to bitcoin use Bitwage. Note: Bitcoins are valued at whatever market price people are willing to pay for them in balancing act of supply vs demand. Unlike traditional markets, bitcoin markets operate 24 hours per day, 365 days per year. Preev is a useful site that that shows how much various denominations of bitcoin are worth in different currencies. Alternatively you can just Google "1 bitcoin in (your local currency)".
Securing your bitcoins
With bitcoin you can "Be your own bank" and personally secure your bitcoins OR you can use third party companies aka "Bitcoin banks" which will hold the bitcoins for you.
If you prefer to "Be your own bank" and have direct control over your coins without having to use a trusted third party, then you will need to create your own wallet and keep it secure. If you want easy and secure storage without having to learn computer security best practices, then a hardware wallet such as the Trezor, Ledger or ColdCard is recommended. Alternatively there are many software wallet options to choose from here depending on your use case.
If you prefer to let third party "Bitcoin banks" manage your coins, try Gemini but be aware you may not be in control of your private keys in which case you would have to ask permission to access your funds and be exposed to third party risk.
Note: For increased security, use Two Factor Authentication (2FA) everywhere it is offered, including email! 2FA requires a second confirmation code to access your account making it much harder for thieves to gain access. Google Authenticator and Authy are the two most popular 2FA services, download links are below. Make sure you create backups of your 2FA codes.
As mentioned above, Bitcoin is decentralized, which by definition means there is no official website or Twitter handle or spokesperson or CEO. However, all money attracts thieves. This combination unfortunately results in scammers running official sounding names or pretending to be an authority on YouTube or social media. Many scammers throughout the years have claimed to be the inventor of Bitcoin. Websites like bitcoin(dot)com and the btc subreddit are active scams. Almost all altcoins (shitcoins) are marketed heavily with big promises but are really just designed to separate you from your bitcoin. So be careful: any resource, including all linked in this document, may in the future turn evil. Don't trust, verify. Also as they say in our community "Not your keys, not your coins".
Where can I spend bitcoins?
Check out spendabit or bitcoin directory for millions of merchant options. Also you can spend bitcoin anywhere visa is accepted with bitcoin debit cards such as the CashApp card. Some other useful site are listed below.
Mining bitcoins can be a fun learning experience, but be aware that you will most likely operate at a loss. Newcomers are often advised to stay away from mining unless they are only interested in it as a hobby similar to folding at home. If you want to learn more about mining you can read more here. Still have mining questions? The crew at /BitcoinMining would be happy to help you out. If you want to contribute to the bitcoin network by hosting the blockchain and propagating transactions you can run a full node using this setup guide. If you would prefer to keep it simple there are several good options. You can view the global node distribution here.
Just like any other form of money, you can also earn bitcoins by being paid to do a job.
You can also earn bitcoins by participating as a market maker on JoinMarket by allowing users to perform CoinJoin transactions with your bitcoins for a small fee (requires you to already have some bitcoins.
The following is a short list of ongoing projects that might be worth taking a look at if you are interested in current development in the bitcoin space.
One Bitcoin is quite large (hundreds of £/$/€) so people often deal in smaller units. The most common subunits are listed below:
one bitcoin is equal to 100 million satoshis
1,000 per bitcoin
used as default unit in recent Electrum wallet releases
1,000,000 per bitcoin
colloquial "slang" term for microbitcoin (μBTC)
100,000,000 per bitcoin
smallest unit in bitcoin, named after the inventor
For example, assuming an arbitrary exchange rate of $10000 for one Bitcoin, a $10 meal would equal:
For more information check out the Bitcoin units wiki. Still have questions? Feel free to ask in the comments below or stick around for our weekly Mentor Monday thread. If you decide to post a question in /Bitcoin, please use the search bar to see if it has been answered before, and remember to follow the community rules outlined on the sidebar to receive a better response. The mods are busy helping manage our community so please do not message them unless you notice problems with the functionality of the subreddit. Note: This is a community created FAQ. If you notice anything missing from the FAQ or that requires clarification you can edit it here and it will be included in the next revision pending approval. Welcome to the Bitcoin community and the new decentralized economy!
Despite the negative rebases and FUD that's been around since we dropped below $1 mark, I'm still bullish on this project and here is why:
As we know all markets go through cycles. After a string of around 28 days of positive rebases, it absolutely makes sense to retract into negative price as people start cashing in. Anybody with the right sense would be cashing in on some profits after the string of those +10% rebases. Can't blame the investors for taking profits either.
As we can see the protocol works as designed. Those that invested without reading up on Ampleforth or at least trying to understand its foundations have lost money simply because they were in for a quick buck. Invested at the top (in this case top of the market cap) selling at the bottom. Negative rebases are ugly but they are part of the protocol.
Removed Pausability - I can't stress enough but this is a huge step into full decentralization and zero governance. What's most important, this is the step that will allow more third-party integrations. I can see this being demanded by the biggest exchanges before the AMPL can be listed there.
It takes time for exchanges to list new coins and especially with AMPL, there are some technical difficulties that need to be overcome. One of them are obviously the nighly rebases where orders will have to be cancelled and tokens deducted/distributed to all holders.
Volume on AMPL - the volume is huge considering it's only listed on a few exchanges. Exchanges make money off trading fees so it makes absolute sense to have AMPL listed on as many exchanges as possible.
One of the biggest investors on this project is the CEO of Coinbase. I think you know where I'm going with it.
Based on the last few cryptos listed on big exchanges such as Curve, Band, Numeraire their prices have been pushed above $10 mark followed by a big selloff. At this point, I'm simply speculating but in case of AMPL being listed on either Coinbase or Binance we will see a huge upward momentum. The question is would we see a big selloff or would marketcap grow massively with the price and because of huge positive rebases investors would stay in for some time before cashing in?
Geyser Yield Farming - The more liquidity you provide, and for longer, the greater share of the AMPL pool you receive.
If the market is going to manipulated and mostly after hours, it should be open for trading 24 hrs a day monday through Friday.
The only money to be made happens after hours, and the small part of the day the market is open seems to just set up traps for the after hours feeding frenzy. The only sensible solution is open the market around the clock. Spy 207p 5/15
Necessary Disclaimer: no rule breaking intended. No price manipulation intended. I only want to share verifiable facts/links and my analysis. If I am doing anything against the rules please let me know and I will do my best to fix it ASAP. I trade crypto, including LINK, and I am currently short on LINK. This is not financial advice; this is just for my own record and to start a discussion for anyone who might want more transparency around LINK.
I believe there is a lot of misinformation, uncertainty, and unanswered questions about the LINK token, the Chainlink ecosystem, the SmartContract parent company. I also believe that LINK's current price is unjustified based on fundamental factors like usage/business case/current customers/future potential. So I'm raising some points and asking some questions. What is this post? Why should I care? How do I use it? Read or skim it. It's about the LINK token, the Chainlink ecosystem, and the parent company SmartContract. It's about why I believe the price of the LINK token may be currently driven mostly by hype and not backed by standard market fundamentals like usage/economics. Update 9 AUG: reorganizing, rewriting this post and moving supporting data/sources into "appendix" comments below on this post. The previous versions of this post and my comments elsewhere were too emotionally charged and caused more division rather than honest, evidence-based, productive discussion and I sincerely apologize for that. I have now rewritten it and will continue to update it.
Threshold signatures, staking, on-chain SLAs: How real are these, is there a roadmap, how will this benefit users, is there any evidence of users currently *wanting* to use chainlink but needing these features and actively waiting for Chainlink to launch these? Staking: for there to be a valid incentive for users to stake LINK, it has to return around 5% annually because anything substantially under that would have users putting their money elsewhere (https://www.stakingrewards.com/cryptoassets) (not counting speculative capital gains in terms of LINK's price, but price gain per token/coin applies to all other crypto projects as well). Currently, for stakable cryptos, around 30-80% of their total supply is staked, and a good adjusted reward is on the order of 5% as well (some actually negative, some 10%+). The promise of staking incentivises people to buy and hold more LINK tokens (again, many other crypto projects have staking already live). That 5% reward will ultimately have to come from the customers who pay Chainlink oracle nodes to use their services, so it's an extra 5% fee for them. Of course, in the near future, the staking rewards *could* be subsidized by the founders' reserve wallets. Threshold signatures: addressed below in a comment. On-chain SLAs: [TODO] Here's supposedly Chainlink's agile/project planning board. (TODO: verify that it is indeed Chainlink's, and then analyse it) https://www.pivotaltracker.com/n/projects/2129823
I manually traced EVERY single inbound transaction/source of funds for the above 4 (not counting #1 as 10 LINK is negligible). 2 & 3 are 99.99%+ genesis-funded, being ACTIVELY topped up by a genesis wallet, last tx 4 days ago, 500,000 LINK. #4 has been funded 36 times over the past year and a half (that's 36 manual exports and I did them all). They all come from the 0x27158..., 0x2f0acb..., and https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0x1f9e26f1c050b5c018ab0e66fcae8e4394eb0165 (another address like the 0x2f0acb that I went through and checked EVERY SINGLE inbound source of funds, and it's also >99.9% genesis-funded - one tx from Binance for 6098 LINK out of a total ~6,560,000 inbound LINK from genesis wallets), and two other addresses linked to Binance (0x1b185c8611d157a67d9a9d5261b0d2bd52c0bb78, 10,000 LINK and 0x039ac18afe298747c51c85e7c8f0d67c327f3883, 1,000,000 LINK) The 0x039ac... address funded the "Chainlink: Aggregator" address with 127,900 LINK, and the 0x1b185... with about ~9,600 LINK). So yes, it's technically possible that someone not related to Chainlink paid for the ETH / USD price feed because some funds do come from Binance. However, they only come from two distinct addresses. Surely for "240+" claimed partnerships, more than TWO would pay to use Chainlink's MOST POPULAR price feed? That is, unless they don't pay directly but to another address and then Chainlink covers this one from their own wallets. I will check if that's in line with Chainlink's whitepaper, but doesn't that throw doubt on the whole model of end-users paying to use oracles/aggregators, even if it's subsidized? I provide you this much detail not to bore you but to show you that I went through BY HAND and checked every single source (detailed sources in Appendix B) of funds for the OFFICIAL, Chainlink-listed "ETH/USD" aggregator that's supposedly sponsored by 10 DeFi partners (Synthetix, LoopSpring, OpenLaw, 1inch, ParaSwap, MCDEX, FuturesSwap, DMM, Aave, The Force Protocol). Yet where are the transactions showing that those 10 partners have EVER paid for this ETH/USD oracle? Perhaps the data is there so what am I missing? This ETH/USD aggregator has transferred out ~76,000 LINK to I guess the data providers in increments of .33 LINK. It has 21 data providers responding. I will begin investigating the data providers themselves soon. And those middle addresses like 0x1f9e26... and 0x2f0acb...? They have transferred out hundreds of thousands if not millions of LINK to exchanges. And that's just ONE price pair aggregator. Chainlink has around 40 of these (albeit this one's one of the more popular ones). SNX / ETH aggregator is funded 100% by genesis-sourced wallets, only 3 inbound transactions: https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0xe23d1142de4e83c08bb048bcab54d50907390828 Some random examples (for later, ignore these for now) *********** https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0x039ac18afe298747c51c85e7c8f0d67c327f3883 bought 1,000,000 LINK from Binance in Sept 12 & 15, 2019. (one of the possible funding sources for the ETH / USD aggregator example above) This address got 500,000 LINK from 0x27158... and has distributed them into ~5-10,000 LINK wallets that haven't had any out transactions yet https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0x5bcf3edc0bb7119e35f322ba40793b99d4620f1e ************** Another example with an unnamed aggregator-node-like wallet that was only spun up 5 days ago, Aug 5: https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0x2cbfd29947f774b8cf338f776915e6fee052f236 It was funded 2,000 LINK SOLELY by the 0x27158... wallet and has so far paid out ~500 LINK in 0.43 LINK amounts to 9 wallets at a time. For example, this is one of the wallets it cashes out to: https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0x64fe692be4b42f4ac9d4617ab824e088350c11c2#tokenAnalytics That wallet extremely consistently collects small amounts of LINK since Oct 2019. It must be a data provider because a lot of Chainlink named wallets pay it small amounts of LINK regularly. It has transferred out 20 times. The most recent transfer out: https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0xc8c30fa803833dd1fd6dbcdd91ed0b301eff87cf which then immediately transferred to the named "1inch.exchange" wallet, so I assume this was a "cash-out" transaction. It has cashed out via this address a lot. Granted, it also has transfer-out transactions that haven't (yet) ended up in an exchange wallet, eg https://etherscan.io/token/0x514910771af9ca656af840dff83e8264ecf986ca?a=0x88e5353a73f38f25a9611e6083de6f361f9b537b with a current balance of 3000 LINK. This could be a user's exchange wallet, ready to be sold, or could be something else. No way for me to tell as there are no out txs from it.
LINK overall transaction, volume, and tx fees
This is to understand how much $ moves through the LINK ecosystem through: nodes, data providers, reserve wallets, wallets linked to exchanges, others. A typical aggregator node tx (payout?): https://etherscan.io/tx/0xef9e8e6dd94ebe9bbac8866f18c2ea0a07408ced1aa77fa04826043eaa55e772 This is their ETH/USD aggregator paying out 1 LINK to each of 21 addresses. Value of 21 LINK ~= $210. Total eth tx fees: .233 ETH (~$88.5, ~42% of the total tx value. If LINK was $4.2 instead of $10, the tx fees would be 100% of the value of the tx). Transactions like this happen every few minutes, and the payout amounts are most often 0.16, 0.66, 1.0, and 2.0 Link. Chainlink’s node/job listing site, https://market.link, lists 86 nodes, 195 feeds, 801 jobs, ~1,080,000 job runs (I can’t tell if this is over the past 2 months or 1.5 years). Only 20 nodes have over 1000 job runs, and 62 nodes have ZERO runs. Usual job cost is listed as 0.1 link, but the overall payout to the nodes is 10-20 times this. The nodes then cash out usually through a few jump addresses to exchanges. Some quick maths: (being generous and assuming it’s 1mil jobs every 2 months = ~6mil link/year = $60,000,000 revenue a year. This is the most generous estimate towards link’s valuation I’ve found so far. If we ignore the below examples where on multi-node payouts the tx fees are more than the node revenue itself, then it’s almost in line with an over-valued (but real) big tech company. For example, one of the latest CHF/USD job runs paid 0.1 LINK to 9 addresses (data providers?) - total $14.4 payout - and paid 0.065 ETH ($24.5) in fees. That’s a $10.1 LOSS on a $14.4 revenue: https://etherscan.io/tx/0xa6351bab810b6864bfebb0f6e1e3bde3c8856f8aac3ba769dd2e6d1a39c0d23f Linkpool’s (one of the biggest node operators) “ETH-USD CryptoCompare” job costs 0.1 link and has 33 runs in the past 24 hours (once every ~44min), total ~78,000 runs since May 30 2019 (once every ~8min). https://market.link/jobs/64bb0845-c4e1-4681-8853-0b5aa7366101/runs (PS cryptocompare has a free API that does this. Not sure why it costs $1 at current link prices to access an API once)
Top 100 wallets (0.05% of ~186,000 total) hold 83% of tokens. 8 wallets each hold over 1% of total, 58 hold over 0.1%. Of these 58, 9 are named exchange/lending pool wallets. For comparison, for Tether (TUSD), the top 100 wallets (0.006% of ~1,651,000 total) hold 35.9% of the supply. 3 addresses hold over 1% of the supply and 135 hold over 0.1%. Of these 135, at least 15 are named exchange/lending pool wallets. LINK’s market cap is $3.5B (or $10B fully diluted, if we count the foundedev-controlled tokens, which we should as there's nothing preventing them from being moved at a moment's notice). Tether’s is $6.9B. Tether has 10 times more addresses and less distribution inequality. Both LINK and Tether are ERC20 tokens, and even if we temporarily ignore any arguments related to management/roadmap/teams etc, Tether has a clear, currently functional, single use case: keep 1 USDT = $1 USD by printing/burning USDT (and yet as of April 2019, only 74% of Tether's market cap is backed by real funds - https://en.wikipedia.org/wiki/Tether_(cryptocurrency))). Given that Chainlink's market cap is now 50% bigger than Tether's, surely by now there's AT LEAST one clear, currently functional use case for LINK? What is it? Can we *see* it happening on-chain?
Chainlink’s actual deliverable products
"What do I currently get for my money if I buy LINK 1) as an investor and 2) as a tech business/startup thinking of using oracles?” Codebase (Chainlink’s github has around 140-200,000 lines of code (not counting html/css). What else is not counted in this? Town crier? Proprietary code that we don't know about yet? How much CODING has Chainlink done other than what's on github? Current network of oracles - only ~20 active nodes - are there many more than the ones listed on market.link and reputation.link? If so, would be nice to know about these if we're allowed! Documentation - they have what seems like detailed instructions on how to launch and use oracle nodes (and much more, I haven't investigated yet) (TODO this part more - what else do they offer to me as an end consumer, and eg as a tech startup needing oracle services that I can’t code myself?)
Network utilization statistics:
Etherscan.io allows csv export of the first 5000 txs from each day. From Jul 31 to Aug 6 2020, I thus downloaded 30,000 tx from midnight every day to an average of 7:10am (so 24 hour totals are 3.34x these numbers if we assume the same network utilization throughout the day). (Summary of all LINK token activity on the ETH blockchain from 31.07 to 06.08, first 5000 txs of each day (30k total) shown Appendix A comment below this post.) If we GENEROUSLY assume that EVERY SINGLE transaction under 10.0 LINK is ACTUAL chainlink nodes doing ACTUAL work, that’s still under 0.1% of the LINK network’s total volume being used for ACTUAL ecosystem functioning. The rest is speculation, trading, node funding by foundedev wallets, or dumping to exchanges (anything I missed?) Assuming the above, the entire turnover of the actual LINK network is currently (18,422 LINK) * ($10/LINK) * (3.34 as etherscan.io’s data only gives first 5000 tx per day which averages to 7:10am) * (52 wk/year) = USD $31,995,329 turnover a year. Note: the below paragraph is old analysis using traditional stock market Price/Earnings ratios which several users have now pointed out isn't really applicable in crypto. I leave it for the record. Assuming all of that is profit (which it’s not given tx fees at the very least), LINK would need a PE ratio (Price/Earnings) of 100 times to justify its current (undiluted) valuation of $3.5 billion of 300 if you count the other 65% of tokens that haven’t been dumped by the founders/devs yet. For comparison, common PE ratios are 32 (facebook), 29 (google), 37 (uber), 20 (twitter on a good year), 10 (good hedge fund returning 10% annual).
Thoughts on DeFi & yield-farming - [TODO]
Why would exchanges who do their due diligence list LINK, let alone at a leverage? 1) that's their business, they take a cut of every transaction, overhyped or not, 2) they're not safe from listing openly bearish tokens like EIDOS (troll token that incentivized users to make FAKE transactions, response to EOS) https://www.coindesk.com/defi-yield-farming-comp-token-explained The current ANNUAL yield on liquidity/yield farming is something like 2% on STABLE tokens like USDC and TETHER which at least have most of their supply backed by real-world assets. If Chainlink LINK staking is to be successful, they'll have to achieve at LEAST that same 2% at end-state. IF LINK is in bubble territory and drops, that's a lot of years at 2% waiting to recoup losses.
SmartContract Team & Past Projects
Normally I don't like focussing on people because it leads too easily to ad-hominem attacks on personality rather than on technology/numbers as I've done above, but I came across this and didn't like what I saw. Steve Ellis, SmartContract's current CTO, co-founded and worked in "Secure Asset Exchange" from 2014 to 2016. They developed the NXT blockchain, issued 1,000,000,000 NXT tokens (remind you of anything?), NXT was listed end of 2013 and saw 3 quick 500%-1000% pumps and subsequent dumps in early in mid 2014, and then declined to . SecureAE officially shut down in Jan 2016. Then at some point a company called Jelurida acquired the rights to NXT (presumably after SecureAE?), then during the 2017 altcoin craze NXT pumped 300 times to a market cap of $1.8 BILLION and then dumped back down 100 times and now it's a dead project with a market cap of $13 million. https://www.linkedin.com/in/steveellis0606/ https://trade.secureae.com/ https://coinmarketcap.com/currencies/nxt/ https://www.jelurida.com/news/lawsuit-against-apollo-license-violations As an investor or business owner, would you invest/hire a company whose co-founders/CTO's last project was a total flop with a price history chart that's textbook pump-and-dump behaviour? (and in this case, we KNOW the end result - 99% losses for investors) If you're Google/Oracle/SWIFT/Intel, would you partner with them?
Open questions for the Chainlink community and investors:
Network activity: Are there any other currently active chainlink nodes other than those listed on market.link and reputation.link? If so, is there a list of them with usage statistics? Do they use some other token than LINK and thus making simple analytics of the LINK ERC20 token not an accurate representation of Chainlink’s actual activity? If the nodes listed on the two sites above ARE currently the main nodes, then
PR, partnership announcements: Why is the google tweet still pinned to the top of Chainlink’s twitter? Due to the frequently circulated Chainlink promotion material (https://chainlinkecosystem.com/) that lists Google as one of the key partners, this tweet being pinned is potentially misleading as there isn't anything in there to merit calling Google a "collaborator" or "partner" - just that blockchains/oracles *can* use Google's APIs (but so can most software in the world). Is there something else going on with the SmartContract-Google relationship that warrants calling Google a partner that we're simply not aware of yet?
By buying LINK, what backs YOUR money: If you have bought and currently hold LINK tokens, how comfortable are you that the future promise of your investment growing is supported on verifiable business and technological grounds versus pure, parabolic hype? If after reading this post you still are, I kindly ask you to reply and show how even one of the points I provided is either incorrect or not applicable, and I will edit my post and include your feedback in the relevant section as I have already done from other users.
What have I missed? Of course not 100% of what I've said is infallible truth. I am a real human, and I have plenty of biases and blind spots. Even if what I've provided is technically correct, there may be other much more important info that I've missed that eclipses what I've provided here. Ask yourself: if the current hype around LINK is indeed valid and points to a $100/$1000 future LINK price, then Where’s Chainlink’s missing financial/performance/usage evidence to justify LINK’s current valuation of $10+?
For your consideration, I have provided evidence with links that you can follow and verify, and draw your own conclusions. I have made my case as to why I believe the LINK token is currently priced much higher than evidence supports, and I ask you to peer-review my analysis and share your thoughts with me and with the wider LINK/crypto community. Thank you for your time, I realize this is a long post. All questions and feedback welcome, feel free to comment or PM. I won't delete/censoblock (except for personal threats, safety considerations etc). I am a real human but I am not revealing my true identity for obvious privacy/harassment reasons. (If anyone is wondering about my credentials ability to add 2+2 and work with basic spreadsheets: I have previously won a math competition in a USA state, I won an English-speaking country's physics olympiad, my university education is in mathematical physics/optimization engineering, and I worked for a few years in a global manufacturing company doing data analytics, obviously I'm not posting my CV here to verify that but I promise you it's the truth) I’m not looking to spread neither FUD, nor blind faith, nor pure hype, and I want an honest transparent objective discussion. I personally believe more that LINK is overvalued, but my beliefs have evolved and may continue to do so as I research more and understand more about Chainlink, LINK, Ethereum, DeFi, and other related topics, and as I incorporate YOUR feedback. If you think I haven't disclosed something, ask. As always, this is not financial advice and I am not liable for anything that may happen as a result of you reading this!
You may have heard about off-shore tax havens of questionable legality where wealthy people invest their money in legal "grey zones" and don't pay any tax, as featured for example, in Netflix's drama, The Laundromat. The reality is that the Government of Canada offers 100% tax-free investing throughout your life, with unlimited withdrawals of your contributions and profits, and no limits on how much you can make tax-free. There is also nothing to report to the Canada Revenue Agency. Although Britain has a comparable program, Canada is the only country in the world that offers tax-free investing with this level of power and flexibility. Thank you fellow Redditors for the wonderful Gold Award and Today I Learned Award! (Unrelated but Important Note: I put a link at the bottom for my margin account explainer. Many people are interested in margin trading but don't understand the math behind margin accounts and cannot find an explanation. If you want to do margin, but don't know how, click on the link.) As a Gen-Xer, I wrote this post with Millennials in mind, many of whom are getting interested in investing in ETFs, individual stocks, and also my personal favourite, options. Your generation is uniquely positioned to take advantage of this extremely powerful program at a relatively young age. But whether you're in your 20's or your 90's, read on! Are TFSAs important? In 2020 Canadians have almost 1 trillion dollars saved up in their TFSAs, so if that doesn't prove that pennies add up to dollars, I don't know what does. The TFSA truly is the Great Canadian Tax Shelter. I will periodically be checking this and adding issues as they arise, to this post. I really appreciate that people are finding this useful. As this post is now fairly complete from a basic mechanics point of view, and some questions are already answered in this post, please be advised that at this stage I cannot respond to questions that are already covered here. If I do not respond to your post, check this post as I may have added the answer to the FAQs at the bottom.
How to Invest in Stocks
A lot of people get really excited - for good reason - when they discover that the TFSA allows you to invest in stocks, tax free. I get questions about which stocks to buy. I have made some comments about that throughout this post, however; I can't comprehensively answer that question. Having said that, though, if you're interested in picking your own stocks and want to learn how, I recommmend starting with the following videos: The first is by Peter Lynch, a famous American investor in the 80's who wrote some well-respected books for the general public, like "One Up on Wall Street." The advice he gives is always valid, always works, and that never changes, even with 2020's technology, companies and AI: https://www.youtube.com/watch?v=cRMpgaBv-U4&t=2256s The second is a recording of a university lecture given by investment legend Warren Buffett, who expounds on the same principles: https://www.youtube.com/watch?v=2MHIcabnjrA Please note that I have no connection to whomever posted the videos.
TFSAs were introduced in 2009 by Stephen Harper's government, to encourage Canadians to save. The effect of the TFSA is that ordinary Canadians don't pay any income or capital gains tax on their securities investments. Initial uptake was slow as the contribution rules take some getting used to, but over time the program became a smash hit with Canadians. There are about 20 million Canadians with TFSAs, so the uptake is about 70%- 80% (as you have to be the age of majority in your province/territory to open a TFSA).
Eligibility to Open a TFSA
You must be a Canadian resident with a valid Social Insurance Number to open a TFSA. You must be at the voting age in the province in which you reside in order to open a TFSA, however contribution room begins to accumulate from the year in which you turned 18. You do not have to file a tax return to open a TFSA. You do not need to be a Canadian citizen to open and contribute to a TFSA. No minimum balance is required to open a TFSA.
Where you Can Open a TFSA
There are hundreds of financial institutions in Canada that offer the TFSA. There is only one kind of TFSA; however, different institutions offer a different range of financial products. Here are some examples:
The Canadian big 5 bank branches and most other financial institutions offer a TFSA that allows you to buy mutual funds, hold cash, GICs, term deposits, and possibly ETFs. This is a good choice if you want guaranteed returns or diversified investing.
There are a number of on-line banks such as Tangerine, Simplii Financial, Oaken Financial, and many more that offer the TFSA.
The discount DIY brokerage arms of the big 5 banks give you more choices, including stocks, warrants, bonds and options. There are also standalone brokers like IBKR Canada, Questrade, Qtrade, and Virtual Brokers, among others, that offer this.
Some brokerages and financial advisors also offer TFSAs that give you these investment choices, in different formats such as:
Traditional brokerage, where a stockbroker invests your money (BMO Nesbitt Burns, RBC Dominion Securities and others)
Financial advisor who will invest your money according to a plan you put together with the advisor (TSI Network and many others)
"Robo" advisors such as Wealthsimple, RBC InvestEase, BMO SmartFolio, or Wealthbar
BMO's AdviceDirect, which is a semi-directed hybrid between standalone DIY investing and fully-advised investing, where you operate on a DIY basis but have access to a registered investment advisor (a live person) who can give you suggetions and advice.
Your TFSA may be covered by either CIFP or CDIC insuranceor both. Ask your bank or broker for details.
What You Can Trade and Invest In
You can trade the following:
GICS, mutual funds, term deposits
individual common and preferred stocks listed on an "approved exchange" which is the TSX, TSX-V, NASDAQ, NYSE, and about 20 other exchanges worldwide, but not the US OTC pink sheets. Many examples, such as Suncor, Linamar, Apple, any of the big banks, and many thousands of others, when you want to buy into an individual company
stock-like securities like REITS, ETFs and ETNs, including 2x and 3x leveraged
gold and silver certificates
cash of many countries (CAD/USD/EUGBP/AUD/NZD/JPY/CHF and many others)
government bills and bonds of most countries, subsovereigns like Canadian provincial bills and bonds, and most corporations
options that trade on the Montreal Exchange or various options exchanges in the USA and the rest of the word (see FAQ for details)
gold, silver bullion certificates
shares in certain private companies -- but consult your tax advisor on this
What You Cannot Trade
You cannot trade:
commodity futures contracts
option spread positions (see FAQ for details)
anything that requires a margin account, meaning, a special kind of account that allows you to borrow money directly from the broker against the assets you have in your account and the assets you intend to buy.
crypto (although there exist crypto ETNs that you can buy)
Again, if it requires a margin account, it's out. You cannot buy on margin in a TFSA. Nothing stopping you from borrowing money from other sources as long as you stay within your contribution limits, but you can't trade on margin in a TFSA. You can of course trade long puts and calls which give you leverage.
Rules for Contribution Room
Starting at 18 you get a certain amount of contribution room. According to the CRA: You will accumulate TFSA contribution room for each year even if you do not file an Income Tax and Benefit Return or open a TFSA. The annual TFSA dollar limit for the years 2009 to2012 was $5,000. The annual TFSA dollar limit for the years 2013 and 2014 was $5,500. The annual TFSA dollar limit for the year 2015 was $10,000. The annual TFSA dollar limit for the years 2016 to 2018 was $5,500. The annual TFSA dollar limit for the year 2019 is $6,000. The TFSA annual room limit will be indexed to inflation and rounded to the nearest $500. Investment income earned by, and changes in the value of TFSA investments will not affect your TFSA contribution room for the current or future years. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/contributions.html If you don't use the room, it accumulates indefinitely. Trades you make in a TFSA are truly tax free. But you cannot claim the dividend tax credit and you cannot claim losses in a TFSA against capital gains whether inside or outside of the TFSA. So do make money and don't lose money in a TFSA. You are stuck with the 15% withholding tax on U.S. dividend distributions unlike the RRSP, due to U.S. tax rules, but you do not pay any capital gains on sale of U.S. shares. You can withdraw *both* contributions *and* capital gains, no matter how much, at any time, without penalty. The amount of the withdrawal (contributions+gains) converts into contribution room in the *next* calendar year. So if you put the withdrawn funds back in the same calendar year you take them out, that burns up your total accumulated contribution room to the extent of the amount that you re-contribute in the same calendar year.
E.g. Say you turned 18 in 2016 in Alberta where the age of majority is 18. It is now sometime in 2020. You have never contributed to a TFSA. You now have $5,500+$5,500+$5,500+$6,000+$6,000 = $28,500 of room in 2020. In 2020 you manage to put $20,000 in to your TFSA and you buy Canadian Megacorp common shares. You now have $8,500 of room remaining in 2020. Sometime in 2021 - it doesn't matter when in 2021 - your shares go to $100K due to the success of the Canadian Megacorp. You also have $6,000 worth of room for 2021 as set by the government. You therefore have $8,500 carried over from 2020+$6,000 = $14,500 of room in 2021. In 2021 you sell the shares and pull out the $100K. This amount is tax-free and does not even have to be reported. You can do whatever you want with it. But: if you put it back in 2021 you will over-contribute by $100,000 - $14,500 = $85,500 and incur a penalty. But if you wait until 2022 you will have $14,500 unused contribution room carried forward from 2021, another $6,000 for 2022, and $100,000 carried forward from the withdrawal 2021, so in 2022 you will have $14,500+$6,000+$100,000 = $120,500 of contribution room. This means that if you choose, you can put the $100,000 back in in 2022 tax-free and still have $20,500 left over. If you do not put the money back in 2021, then in 2022 you will have $120,500+$6,000 = $126,500 of contribution room. There is no age limit on how old you can be to contribute, no limit on how much money you can make in the TFSA, and if you do not use the room it keeps carrying forward forever. Just remember the following formula: This year's contribution room = (A) unused contribution room carried forward from last year + (B) contribution room provided by the government for this year + (C) total withdrawals from last year. EXAMPLE 1: Say in 2020 you never contributed to a TFSA but you were 18 in 2009. You have $69,500 of unused room (see above) in 2020 which accumulated from 2009-2020. In 2020 you contribute $50,000, leaving $19,500 contribution room unused for 2020. You buy $50,000 worth of stock. The next day, also in 2020, the stock doubles and it's worth $100,000. Also in 2020 you sell the stock and withdraw $100,000, tax-free. You continue to trade stocks within your TFSA, and hopefully grow your TFSA in 2020, but you make no further contributions or withdrawals in 2020. The question is, How much room will you have in 2021? Answer: In the year 2021, the following applies: (A) Unused contribution room carried forward from last year, 2020: $19,500 (B) Contribution room provided by government for this year, 2021: $6,000 (C) Total withdrawals from last year, 2020: $100,000 Total contribution room for 2021 = $19,500+6,000+100,000 = $125,500. EXAMPLE 2: Say between 2020 and 2021 you decided to buy a tax-free car (well you're still stuck with the GST/PST/HST/QST but you get the picture) so you went to the dealer and spent $25,000 of the $100,000 you withdrew in 2020. You now have a car and $75,000 still burning a hole in your pocket. Say in early 2021 you re-contribute the $75,000 you still have left over, to your TFSA. However, in mid-2021 you suddenly need $75,000 because of an emergency so you pull the $75,000 back out. But then a few weeks later, it turns out that for whatever reason you don't need it after all so you decide to put the $75,000 back into the TFSA, also in 2021. You continue to trade inside your TFSA but make no further withdrawals or contributions. How much room will you have in 2022? Answer: In the year 2022, the following applies: (A) Unused contribution room carried forward from last year, 2021: $125,500 - $75,000 - $75,000 = -$24,500. Already you have a problem. You have over-contributed in 2021. You will be assessed a penalty on the over-contribution! (penalty = 1% a month). But if you waited until 2022 to re-contribute the $75,000 you pulled out for the emergency..... In the year 2022, the following would apply: (A) Unused contribution room carried forward from last year, 2021: $125,500 -$75,000 =$50,500. (B) Contribution room provided by government for this year, 2022: $6,000 (C) Total withdrawals from last year, 2020: $75,000 Total contribution room for 2022 = $50,500 + $6,000 + $75,000 = $131,500. ...And...re-contributing that $75,000 that was left over from your 2021 emergency that didn't materialize, you still have $131,500-$75,000 = $56,500 of contribution room left in 2022. For a more comprehensive discussion, please see the CRA info link below.
FAQs That Have Arisen in the Discussion and Other Potential Questions:
Equity and ETF/ETN Options in a TFSA: can I get leverage? Yes. You can buy puts and calls in your TFSA and you only need to have the cash to pay the premium and broker commissions. Example: if XYZ is trading at $70, and you want to buy the $90 call with 6 months to expiration, and the call is trading at $2.50, you only need to have $250 in your account, per option contract, and if you are dealing with BMO IL for example you need $9.95 + $1.25/contract which is what they charge in commission. Of course, any profits on closing your position are tax-free. You only need the full value of the strike in your account if you want to exercise your option instead of selling it. Please note: this is not meant to be an options tutorial; see the Montreal Exchange's Equity Options Reference Manual if you have questions on how options work.
Equity and ETF/ETN Options in a TFSA: what is ok and not ok? Long puts and calls are allowed. Covered calls are allowed, but cash-secured puts are not allowed. All other option trades are also not allowed. Basically the rule is, if the trade is not a covered call and it either requires being short an option or short the stock, you can't do it in a TFSA.
Live in a province where the voting age is 19 so I can't open a TFSA until I'm 19, when does my contribution room begin? Your contribution room begins to accumulate at 18, so if you live in province where the age of majority is 19, you'll get the room carried forward from the year you turned 18.
If I turn 18 on December 31, do I get the contribution room just for that day or for the whole year? The whole year.
Do commissions paid on share transactions count as withdrawals? Unfortunately, no. If you contribute $2,000 cash and you buy $1,975 worth of stock and pay $25 in commission, the $25 does not count as a withdrawal. It is the same as if you lost money in the TFSA.
How much room do I have? If your broker records are complete, you can do a spreadsheet. The other thing you can do is call the CRA and they will tell you.
TFSATFSA direct transfer from one institution to another: this has no impact on your contributions or withdrawals as it counts as neither.
More than 1 TFSA: you can have as many as you want but your total contribution room does not increase or decrease depending on how many accounts you have.
Withdrawals that convert into contribution room in the next year. Do they carry forward indefinitely if not used in the next year? Answer :yes.
Do I have to declare my profits, withdrawals and contributions? No. Your bank or broker interfaces directly with the CRA on this. There are no declarations to make.
Risky investments - smart? In a TFSA you want always to make money, because you pay no tax, and you want never to lose money, because you cannot claim the loss against your income from your job. If in year X you have $5,000 of contribution room and put it into a TFSA and buy Canadian Speculative Corp. and due to the failure of the Canadian Speculative Corp. it goes to zero, two things happen. One, you burn up that contribution room and you have to wait until next year for the government to give you more room. Two, you can't claim the $5,000 loss against your employment income or investment income or capital gains like you could in a non-registered account. So remember Buffett's rule #1: Do not lose money. Rule #2 being don't forget the first rule. TFSA's are absolutely tailor-made for Graham-Buffett value investing or for diversified ETF or mutual fund investing, but you don't want to buy a lot of small specs because you don't get the tax loss.
Moving to/from Canada/residency. You must be a resident of Canada and 18 years old with a valid SIN to open a TFSA. Consult your tax advisor on whether your circumstances make you a resident for tax purposes. Since 2009, your TFSA contribution room accumulates every year, if at any time in the calendar year you are 18 years of age or older and a resident of Canada. Note: If you move to another country, you can STILL trade your TFSA online from your other country and keep making money within the account tax-free. You can withdraw money and Canada will not tax you. But you have to get tax advice in your country as to what they do. There restrictions on contributions for non-residents. See "non residents of Canada:" https://www.canada.ca/content/dam/cra-arc/formspubs/pub/rc4466/rc4466-19e.pdf
The U.S. withholding tax. Dividends paid by U.S.-domiciled companies are subject to a 15% U.S. withholding tax. Your broker does this automatically at the time of the dividend payment. So if your stock pays a $100 USD dividend, you only get $85 USD in your broker account and in your statement the broker will have a note saying 15% U.S. withholding tax. I do not know under what circumstances if any it is possible to get the withheld amount. Normally it is not, but consult a tax professional.
The U.S. withholding tax does not apply to capital gains. So if you buy $5,000 USD worth of Apple and sell it for $7,000 USD, you get the full $2,000 USD gain automatically.
Tax-Free Leverage. Leverage in the TFSA is effectively equal to your tax rate * the capital gains inclusion rate because you're not paying tax. So if you're paying 25% on average in income tax, and the capital gains contribution rate is 50%, the TFSA is like having 12.5%, no margin call leverage costing you 0% and that also doesn't magnify your losses.
Margin accounts. These accounts allow you to borrow money from your broker to buy stocks. TFSAs are not margin accounts. Nothing stopping you from borrowing from other sources (such as borrowing cash against your stocks in an actual margin account, or borrowing cash against your house in a HELOC or borrowing cash against your promise to pay it back as in a personal LOC) to fund a TFSA if that is your decision, bearing in mind the risks, but a TFSA is not a margin account. Consider options if you want leverage that you can use in a TFSA, without borrowing money.
Dividend Tax Credit on Canadian Companies. Remember, dividends paid into the TFSA are not eligible to be claimed for the credit, on the rationale that you already got a tax break.
FX risk. The CRA allows you to contribute and withdraw foreign currency from the TFSA but the contribution/withdrawal accounting is done in CAD. So if you contribute $10,000 USD into your TFSA and withdraw $15,000 USD, and the CAD is trading at 70 cents USD when you contribute and $80 cents USD when you withdraw, the CRA will treat it as if you contributed $14,285.71 CAD and withdrew $18,75.00 CAD.
OTC (over-the-counter stocks). You can only buy stocks if they are listed on an approved exchange ("approved exchange" = TSX, TSX-V, NYSE, NASDAQ and about 25 or so others). The U.S. pink sheets "over-the-counter" market is an example of a place where you can buy stocks, that is not an approved exchange, therefore you can't buy these penny stocks. I have however read that the CRA make an exception for a stock traded over the counter if it has a dual listing on an approved exchange. You should check that with a tax lawyer or accountant though.
The RRSP. This is another great tax shelter. Tax shelters in Canada are either deferrals or in a few cases - such as the TFSA - outright tax breaks, The RRSP is an example of a deferral. The RRSP allows you to deduct your contributions from your income, which the TFSA does not allow. This deduction is a huge advantage if you earn a lot of money. The RRSP has tax consequences for withdrawing money whereas the TFSA does not. Withdrawals from the RRSP are taxable whereas they are obviously not in a TFSA. You probably want to start out with a TFSA and maintain and grow that all your life. It is a good idea to start contributing to an RRSP when you start working because you get the tax deduction, and then you can use the amount of the deduction to contribute to your TFSA. There are certain rules that claw back your annual contribution room into an RRSP if you contribute to a pension. See your tax advisor.
Pensions. If I contribute to a pension does that claw back my TFSA contribution room or otherwise affect my TFSA in any way? Answer: No.
The $10K contribution limit for 2015. This was PM Harper's pledge. In 2015 the Conservative government changed the rules to make the annual government allowance $10,000 per year forever. Note: withdrawals still converted into contribution room in the following year - that did not change. When the Liberals came into power they switched the program back for 2016 to the original Harper rules and have kept the original Harper rules since then. That is why there is the $10,000 anomaly of 2015. The original Harper rules (which, again, are in effect now) called for $500 increments to the annual government allowance as and when required to keep up with inflation, based on the BofC's Consumer Price Index (CPI). Under the new Harper rules, it would have been $10,000 flat forever. Which you prefer depends on your politics but the TFSA program is massively popular with Canadians. Assuming 1.6% annual CPI inflation then the annual contribution room will hit $10,000 in 2052 under the present rules. Note: the Bank of Canada does an excellent and informative job of explaining inflation and the CPI at their website.
Losses in a TFSA - you cannot claim a loss in a TFSA against income. So in a TFSA you always want to make money and never want to lose money. A few ppl here have asked if you are losing money on your position in a TFSA can you transfer it in-kind to a cash account and claim the loss. I would expect no as I cannot see how in view of the fact that TFSA losses can't be claimed, that the adjusted cost base would somehow be the cost paid in the TFSA. But I'm not a tax lawyeaccountant. You should consult a tax professional.
Transfers in-kind to the TFSA and the the superficial loss rule. You can transfer securities (shares etc.) "in-kind," meaning, directly, from an unregistered account to the TFSA. If you do that, the CRA considers that you "disposed" of, meaning, equivalent to having sold, the shares in the unregistered account and then re-purchased them at the same price in the TFSA. The CRA considers that you did this even though the broker transfers the shares directly in the the TFSA. The superficial loss rule, which means that you cannot claim a loss for a security re-purchased within 30 days of sale, applies. So if you buy something for $20 in your unregistered account, and it's trading for $25 when you transfer it in-kind into the TFSA, then you have a deemed disposition with a capital gain of $5. But it doesn't work the other way around due to the superficial loss rule. If you buy it for $20 in the unregistered account, and it's trading at $15 when you transfer it in-kind into the TFSA, the superficial loss rule prevents you from claiming the loss because it is treated as having been sold in the unregistered account and immediately bought back in the TFSA.
Day trading/swing trading. It is possible for the CRA to try to tax your TFSA on the basis of "advantage." The one reported decision I'm aware of (emphasis on I'm aware of) is from B.C. where a woman was doing "swap transactions" in her TFSA which were not explicitly disallowed but the court rules that they were an "advantage" in certain years and liable to taxation. Swaps were subsequently banned. I'm not sure what a swap is exactly but it's not that someone who is simply making contributions according to the above rules would run afoul of. The CRA from what I understand doesn't care how much money you make in the TFSA, they care how you made it. So if you're logged on to your broker 40 hours a week and trading all day every day they might take the position that you found a way to work a job 40 hours a week and not pay any tax on the money you make, which they would argue is an "advantage," although there are arguments against that. This is not legal advice, just information.
The U.S. Roth IRA. This is a U.S. retirement savings tax shelter that is superficially similar to the TFSA but it has a number of limitations, including lack of cumulative contribution room, no ability for withdrawals to convert into contribution room in the following year, complex rules on who is eligible to contribute, limits on how much you can invest based on your income, income cutoffs on whether you can even use the Roth IRA at all, age limits that govern when and to what extent you can use it, and strict restrictions on reasons to withdraw funds prior to retirement (withdrawals prior to retirement can only be used to pay for private medical insurance, unpaid medical bills, adoption/childbirth expenses, certain educational expenses). The TFSA is totally unlike the Roth IRA in that it has none of these restrictions, therefore, the Roth IRA is not in any reasonable sense a valid comparison. The TFSA was modeled after the U.K. Investment Savings Account, which is the only comparable program to the TFSA.
The UK Investment Savings Account. This is what the TFSA was based off of. Main difference is that the UK uses a 20,000 pound annual contribution allowance, use-it-or-lose-it. There are several different flavours of ISA, and some do have a limited recontribution feature but not to the extent of the TFSA.
Is it smart to overcontribute to buy a really hot stock and just pay the 1% a month overcontribution penalty? If the CRA believes you made the overcontribution deliberately the penalty is 100% of the gains on the overcontribution, meaning, you can keep the overcontribution, or the loss, but the CRA takes the profit.
Speculative stocks-- are they ok? There is no such thing as a "speculative stock." That term is not used by the CRA. Either the stock trades on an approved exchange or it doesn't. So if a really blue chip stock, the most stable company in the world, trades on an exchange that is not approved, you can't buy it in a TFSA. If a really speculative gold mining stock in Busang, Indonesia that has gone through the roof due to reports of enormous amounts of gold, but their geologist somehow just mysteriously fell out of a helicopter into the jungle and maybe there's no gold there at all, but it trades on an approved exchange, it is fine to buy it in a TFSA. Of course the risk of whether it turns out to be a good investment or not, is on you.
Remember, you're working for your money anyway, so if you can get free money from the government -- you should take it! Follow the rules because Canadians have ended up with a tax bill for not understanding the TFSA rules. Appreciate the feedback everyone. Glad this basic post has been useful for many. The CRA does a good job of explaining TFSAs in detail at https://www.canada.ca/content/dam/cra-arc/formspubs/pub/rc4466/rc4466-19e.pdf
Unrelated but of Interest: The Margin Account
Note: if you are interested in how margin accounts work, I refer you to my post on margin accounts, where I use a straightforward explanation of the math behind margin accounts to try and give readers the confidence that they understand this powerful leveraging tool.
Chain Games has just come out not even 6 hours ago and is already trading at over 10m volume with over 1500 holding addresses. They already have a working product - Super Crypto Cart, which you can download right now and play on PC. Market cap is currently only over $10m, so incredibly low still. Circulating supply is currently 275m. There is a huge chance for this one to blow up. The gaming industry is already massive and growing each day, as well as influencers having a huge impact on the industry as well. This will propel the gaming industry to a new level. Blockchain Gaming Redefined Chain Games is an evolution in Web 3.0 blockchain gaming combining smart contract based wagering with state of the art gameplay. We are committed to transitioning the blockchain gaming industry into the modern gaming era. A Complete Gaming Ecosystem in Three Categories Proprietary Games Chain Games has launched its flagship title Super Crypto Kart, with more amazing 1st party titles to come. This allows for all users to get started on day one of launch, betting against other players in REAL LIVE matches with REAL CRYPTO PAYOUTS! Open dApp Store Any developer can integrate the Chain Games wagering system in their game. After uploading their game, developers earn a share of the 3% rake from each match. This is such a no-brainer for any 3rd party developer to submit, this dApp store will fill up FAST! Integration w/ Game Studios Chain Games aims to partner with established game studios with millions of users each. These integrations will allow these studios to earn significantly more revenue, while opening Chain Games & the CHAIN token to an immense market. Whitepaper - https://chaingames.io/wp-content/uploads/2020/08/Chain_Games-White-Paper-Aug-2020v4.pdf Website - chaingames.io Telegram - https://t.me/chaingames DON’T MISS THIS ONE!
Swing trading is particularly well-suited to the crypto market due to its volatility. Cryptocurrencies such as Bitcoin often swing aggressively upwards and downwards in the span of a few hours. These are the trading hours that usually drive the highest trade volume in each region. Although a market can be “closed,” there might be huge movements in the global market depending on news and speculations. Why is the converter useful if the crypto trading market is open 24/7? Trade on the price of popular cryptocurrencies against the US dollar, via a CFD trading account. View the spreads and margin rates in the table below. Trading hours for all cryptocurrencies are from 11pm Sunday - 9pm Friday. The New York Stock Exchange (NYSE) has normal trading hours from 9:30 a.m. to 4 p.m. local time, unless there’s an early close due to a holiday. Nasdaq trading hours begin at 9:30 a.m. and end at 4 p.m. Pre-market trading hours are from 4 a.m. to 9:30 a.m. local time, and after-hours trading extends from 4 p.m. to 8 p.m. Trading Hours in Canada 24/7 depends though, because people around the world have different power on the market. There are certain peak points.
Stock Market Trading VS Crypto Trading Which one should you trade?
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