Is Buying Altcoins with BTC Always a Losing Game?

So, whenever you're looking to grab an altcoin, like IOTA or Lisk, you usually gotta buy it using BTC rather than USD or USDT. A lot of these altcoins just don’t have USD or USDT pairs. Let’s say you buy 1K worth of BTC at 1K, so you end up with 1 BTC. But there's a fee for the purchase, so you might only get $997.50 worth of BTC. Now, if you're eyeing Lisk at a simple $1, you spend your BTC, which is about 0.9975 BTC. After fees, you’re looking at around $995 worth of Lisk, or about 995 Lisk. The catch is, once you buy that BTC at $1,000, you usually gotta transfer it to another exchange to get your altcoin. That transfer can cost you anywhere from 10 cents to a dollar. Then, when you sell BTC for Lisk, by the time you make that transaction, the BTC price probably won’t be the same as when you bought it. Let’s say BTC is now at $998 when you do the trade. So here’s the deal: - You bought BTC at $1,000 - You sold it at $998 That’s a capital loss, right? So, you don’t really buy or sell Lisk until you actually sell it, correct? But check this out. If you manage to buy and sell BTC at the exact same price, which can happen during those brief moments when the price is stable, then there’s no gain or loss, right? Or is there always a loss because of the transfer fee? And what about the transaction fee? Like, if you bought BTC at 1K and sold it at 1K to get Lisk... you’re never gonna end up with a full 1,000 Lisk.

I did not understand the point you want to make, but let's summarize the following:    - 1 Bitcoin = 1 Bitcoin.  - If you are afraid of fluctuation in price do not buy BTC or at least do not think about USD value.  - Transaction fees are very low and are often less than $ 0.1.  - You can send one million USD using 1 dollar fees.  - You can trade with the same value (P2P deal) and pay tx fees only.  - BTC to Altcoin services (challegy) offers direct conversion with small fees. in short, it is possible to exchange BTC to any altcoin using tx fees only (less than 1$?!.)

It's very difficult to figure out what you actually try to explain. Firstly, it really depends on what country you're in to figure out what can be seen as a taxable event and what not, but generally speaking, it should be something like this: Fiat to crypto = (mostly) not a taxable event Crypto to crypto = taxable event Crypto to fiat = taxable event What matters is the fiat value of your entry point, and the fiat value of your exit point, and over that amount you either report a gain or a loss. Pretty straightforward if I may say so. Depending on your country, there can be a certain allowance for gains and losses that you don't have to report, but to be sure you really need to contact your tax authority.

This is a mathematical solutions to resolve the problem what did you want go solve, any way op pointing the the fees in very transactions se ding and traded buy bitcoin or altcoins he loss their money because of the fees, but not actually loss their money every time he make transaction fees is normal, if they wantbto,earn he need to know how to get eaen in digital currency mathematically. Wait for the price hype before complain for sure op can get earn investing in crypto.

I actually had the hard time on understanding this one but as I had read up; BTC to fiat pairs are few so you wont have any option to take if you do tend to purchase up bitcoin with fiat. BTC to Alts does have corresponding fee (it isn't something new) if you do trade up and minding losses and gain then expect it can happen anytime due to price swings.It will just vary on what you are trying to accumulate as gain - either solely with BTC or focused on fiat value or even on alt one.

Don't know why you ppl seem confused.  If you want to buy altcoin, you need to buy btc almost always to get that altcoin.  Example say you want to buy lisk, you can't just send money to coinbase or bittrex and then buy lisk with usd.  So wouldn't that mean you lose money each time almost since you have to pay the trading fees?

close to accurate if you are in the USA . Cash to btc to alt . May make a 2 -4 dollar loss that is to be put on you schedule D due to fee of conversion.  Ie 1000 in btc was  2 dollar fee so 998 is value of the btc.  Next the exchange of btc to alt coin say a 2 dollar fee. And the value of the alt when purchased is 996.  So you would report a 4 loss due to fees if you keep holding the alt coin and the alt coin has a cost basis of 996.  Note this is all 2018 Jan 1 or later. As all crypto exchanges of coin to any thing trigger cap gain or loss.  This is all usa based.

Another solution I think generally despite the confusion in your post  is to hodl longer before  re-selling again when price would have appreciated, at that time the loss would be avoided.

If you bought your altcoin for $1000 and selling it for $998 included all the expenses for this purchase then you lost $2 from you pocket. But if you buy bitcoin for $1000 and keep it for over a month at that time you may expect 5% increase so you will make $50 but buying bitcoins against USD value will make you loss interms of btc.

I doubt that the 1,000$ worth of BTC you have bought will still be valued at 1k when you are buying Lisk. The only number you must remember when you are buying altcoins with BTC is the current price of BTC when you will be buying the altcoin because it will be its current market value, this will be the part when you know whether or not you have capital gains when you are completing the transaction. Then this will also be the time when you will be deducting the necessary expenses and fees involved in the trade.

Your life would be easier if you treated Bitcoin as a dollar amount and whatever is left from the Bitcoin you bought is the capital gain you have (if any). But if we are talking about a loss here than it would be easier since nothing will be left in your Bitcoin and the Lisk you will buy in this scenario would be less than what you expected from the first time.

People are making things way to difficult for themselves. The IRS doesn't care about the fees you pay to the exchange, so don't calculate them because it only leads to extra confusion. It's just you using $1000 worth of BTC to purchase $1000 worth of Lisk. Whenever you sell (be it at a profit or loss) you still have to use the $1000 as a base, even if you lost a few bucks in fees to the exchange. It would be extremely helpful if governments would provide guides on how to properly declare gains or losses with how most people in crypto haven't had any prior experience with investments and taxation.

With this illustration, what you have assumed is that that the value of the alt coin you have purchased did not increase but that is not always the case. When you purchased Lisk for 1$ and say you have 990 units of that after you might have incur several charges to the tune of $10. The moment the price of Lisk increased by say 30% you have made a gain because that means if you should sell for BTC, your revenue becomes $1287 and irrespective of the charges you might have incurred the amount has been covered. The same thing goes if you buy BTC, you buy say 0.01btc for whatever amount, when prices increases, you 0.01btc remains constant just now its has more value which amount to capital gain.

depends on the movement of the price  .  the price can move ( go up or down ) even at every minute or seconds but those are rare to occur because based on what i observed the price moves  a day or two and longer could be weeks .  better if you can check the price of alts first before you buy it with your btc  .   buy that alt if the price of that alt drops  so that you wont loose a capital and you can sell it again when the price of that alt increases in order for you to earn an income    .

with bitcoin dominating the market more than ever ,  it is now almost 70% dominance means that its price is growing faster than that of the all of the altcoins combined you can't generalize though , there are some alts that are performing okeyish and a few that outperforming bitcoin BNB comes to mind , but not many other top 100 coins , unfortunately but on average , you will lose most of the times if you sell bitcoin and sit in altcoin

Yes im from the us but not in the us at the moment.  I want to know how its treated when you buy altcoin since you dont go directly from usd to altcoin like with btc/litecoin/eth to usd etc.

The answer to your question is already here. It doesn't matter whether you go through 1 coin to get your altcoin, or 2. Whether it's on the same exchange or another one that you have to send your coins to. It's money in vs money out. You pay 1000 USD, go through the whole process to buy Lisk and that process leads to 10% loss before you even get your altcoin. This means that you don't owe anything in taxes yet, you are at a loss. When you decide to withdraw you will know if you owe anything. If it happens to be 1200 USD you will have 200USD of taxable income. I hope that it's clear now. If you are a US citizen who lives in the US but is now temporarily in another country you most likely are still under US jurisdiction and owe taxes there. If you get permanent residency in a country like Malta, you will pay taxes there and this means no crypto income tax.

Using Bitcoin as capital will surely result of losing if you buy shit Altcoins but if you choose the best Altcoins in the market like Ethereum, Ripple and etc then the chance of losing is reduced. Bitcoin and Altcoin market are both unpredictable therefore do not be a closed minded person that investing in Altcoin using Bitcoin is just a waste of money.

You might want to look at 1Referee's post. To make it even more simple for you, exchange fees are NOT capital losses, because they are simply a service fee that exchanges charge and not actual depreciation of your assets. There is a clear distinction between the two. The best thing to do is to keep track of all your records in terms of your relevant fiat, depending on the country that you are in. Don't get caught up in an alt's value relative to BTC. If you made a gain in terms of USD, and your jurisdiction is the USA, then yes, you've made a capital gain. Vice versa, even if you made a gain in terms of BTC but made a loss in USD terms. Check with your tax agency's official site on what constitutes as a "capital gains/loss event".

Your computation is correct, when buying altcoins with Bitcoin you should not mind the transaction fee which is usually very low, you should already calculate the fee that you are going to use and you should not consider it as your loss already, if this is your thinking then you just have to settle with Bitcoin alone and do not mind all the other coins, in cryptocurrency investing its part of our trading routine to always consider the trading fee and do not consider it as a lost.