There’s a lot of belief among the tech savvy, particularly those with a libertarian bent, in the power of crypto-assets to get governments and their regulations and banks and their fees out of their lives.

Believers like Michael Mylonas are not at all spooked by the big falls (and, so far, subsequent recoveries) in the values of cryptocurrencies during the past couple of months.

Cryptocurrency under the eye of tax office

One of the country’s leading tax experts has warned that cryptocurrency speculators may face higher than expected tax bills.

The 23-year-old record label director from Perth says he is still well ahead with his punt on cryptocurrency and other crypto-assets, the “blockchain” technology companies that underpin crypto.

Blockchains can cut out the middle people in financial transactions, and their fees, but also present plenty of other opportunities for new ways of record keeping.

When Money first interviewed Mylonas three months ago, he estimated that he had made 17 times his original investment in crypto-assets in the nine months he had been investing.

Bitcoin, the biggest digital coin of them all, slumped to just under $US7000 on Tuesday, amid wider market turmoil. It had already fallen to $US8000 last week, the lowest it had been since early November last year.

So far, each time it dips it has gone on to recover and who knows what will happen this time. At the time of writing, share prices are falling around the world, led by Wall Street. After Bitcoin slumped in late November it went on to a record high of about $US19,000 in December.

Mylonas sold all his Bitcoin last year as the technology of other virtual currencies has surpassed Bitcoin. As Bitcoin has slumped during past several days, other crypto like ripple and ethereum have also dipped.

“There’s a lot of hype in the market but as far as the tech [blockchain] is concerned, it’s still at early adopter stage,” Mylonas says.

The market for crypto-assets, not just cryptocurrencies, is “purely speculative”.

“The bubble will burst eventually,” Mylonas says. “Ninety nine per cent of these crypto-assets will not be around in five years’ time.”

Financial authorities around the world are worried particularly by cryptocurrencies’ role in leakage of tax collection, as payments using crypto cannot be traced.

So far, its use as a medium of exchange is limited as its value is so volatile and transaction costs high.

The transaction cost borne by the transacting parties of Bitcoin is about $US15. And the payment takes at least 10 minutes to process.

Worries over government crack-downs on crypto and hacks into crypto exchanges, such as that in Japan recently, are making crypto even more volatile than usual.

Even if values of the crypto-assets Mylonas holds were to fall 90 per cent tomorrow, he would still be significantly ahead.

While the participation in the crypto mania is growing quickly, it’s still largely restricted to those usually younger, technology-savvy speculators.

Without mass participation, a sustained crash in crypto prices should be contained without implications for financial stability.

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