Higher prices mean more giving. More giving means more adoption
Bitcoin has left every other asset class in the dust. And that outperformance didn’t just happen this year – it outperformed all assets over the past five and ten years. As we approach a new record high, 99 percent of bitcoin owners are making a profit. Considering how quickly bitcoin has risen, it should come as no surprise that price increases lead to significant bitcoin donations.
The last time Bitcoin hit $ 20,000, we saw more than $ 100 million worth of bitcoin donated to nonprofits in one month. Much of it came from the Pineapple Fund which donated approximately $ 56,000,000 to 60 different nonprofits. The Pineapple Fund supported a wide variety of causes such as Pencils of Promise, the Mona Foundation and The Water Project.
But why do people donate Bitcoin?
Donating valued bitcoin is often the most tax-efficient way to support your favorite cause, be it childhood hunger or education. The tax breaks are very similar to donating valued shares. People like Jack Dorsey don’t donate $ 1 billion in Square stock for the sake of convenience. He and many others donate their shares for the big tax breaks.
Ask your financial advisor, it is a very common tax strategy. They will tell you to donate your most prized possession first. Since the IRS classifies bitcoin as ownership, that means no capital gains tax and a fair market value deduction on your tax return, which means you could save more than 30 percent, so it’s a great way to get some (or all) of it. your capital gains taxes in a bull market. I bet Dorsey will donate in bitcoin next time.
What’s even better? If you already donate by credit card or some other traditional method, leave money on the table. Donate a certain amount in bitcoin and buy back that exact amount. Since there is no “washing rule” for bitcoin, it is even more tax efficient than a stock donation. You will get a 20 to 30 percent higher deduction on your donation, since it will be in pre-tax dollars. While I’m using the US as an example, this is also the case in many other countries – but be sure to consult your tax advisor.
Creating a virtuous cycle
In addition to the tax benefit, giving bitcoin creates a positive cycle. More bitcoin gifts result in more acceptance from nonprofits, resulting in more general awareness, resulting in higher prices. One impact of the Pineapple Fund that is not often discussed is the impact the donations had on mainstream adoption. Imagine hearing about Bitcoin for the first time because your favorite charity has received a $ 1 million bitcoin gift. That is a completely different way of introducing people to Bitcoin.
The Pineapple Fund generated positive press in almost all mainstream media. It has been the biggest ‘bitcoin for good’ story to date. I wouldn’t be surprised if similar stories crop up once we hit a new record. How long does it take for a CEO of a major cryptocurrency company to make a multi-million dollar bitcoin donation? It probably won’t be long before we see something similar to the Pineapple Fund.
The bottom line: Would you rather donate to your favorite charity or the IRS? Donate bitcoin to one or more of the more than 120 bitcoin-friendly non-profit organizations Bitcoin Black Friday and Bitcoin Tuesday here. 2020 was great for Bitcoin awareness. Let’s make sure to keep the positive cycle of bitcoin giving going.
This is a guest post from Alex Wilson. The views expressed are entirely its own views and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.