Information provided here is general and is for informational purposes only, and should not be construed as a recommendation to engage in any transaction or be taken to suggest a
strategy in respect of any digital assets or the developers thereof. We do not provide advisory services regarding investment, tax, legal, financial, accounting, consulting, or any other
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accuracy or completeness of the information contained herein. This information may include opinions, estimates, projections and other information that might be considered forward-
looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to
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mind that we will not revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.
IDEX Quarterly Insights Report
3. “The first quarter of 2020 was one of a kind. The COVID-19 outbreak has hit economies far
and wide, putting much of the crypto world to the test. Despite many of the challenges this has
created, our team is still steadily moving forward on the road to IDEX 2.0. We launched a
mobile demo this past quarter and are looking forward to sharing more exciting news in Q2. In
the meantime, we wish you good health and peace of mind."
4. Key Takeaways
Crypto & Taxes
Ask Before Your Stake
Next Steps to Consider
EQUITIES IN COVID-19
Bitcoin started 2020 on track to its best Q1 since
2013. On February 13, it gained more than 50
percent after reaching the current year high.
IDEX Quarterly Insights Report, Q1 2020 1
However, the rally hit a snag and the coronavirus pandemic's
economic blow quickly affected all markets.
For Q1 2020:
• The Nikkei 225 lost 20 percent, its worst 3-month showing
• The FTSE lost 14 percent, its second-worst quarterly
• The S&P 500 lost 18 percent, its worst quarter since 1938.
While bitcoin was down just 10 percent for the quarter, the
market still crashed 50 percent from its February high. trending
very much in line with traditional markets. Is this truly the mark
of an non-correlated asset?
This is not the first time bitcoin has behaved similarly to mainstream
markets. However, there has also been other periods of higher
correlation to gold, more fitting of the cryptocurrency's aspirations.
As bitcoin continues to age, it may develop a more predictable pattern
relative to traditional markets and world events. It's easy to forget that
Bitcoin has only been in existence for roughly 11 years.
During a major crisis like the one we have now, most people are not
willing to speculate on bitcoin. Even those who are comfortable with
cryptocurrencies may find themselves turning to stablecoins to hedge
against falling markets.
For crypto enthusiasts and investors, it’s important to recognize there
are many broader factors than simple correlation. Fear, panic, and
times of vulnerability can drive many investors to cash in, decoupling
price from fundamental value. This is echoed across all markets, not
With markets reeling from the COVID-19 impact,
alternative assets have not managed to escape.
Bitcoin, previously lauded as “digital gold” for its
potential to offer protection during periods of market
turmoil, did not avoid the vicious downward spiral.
During Q1, its tandem movements with traditional
markets reignited debate on whether or not bitcoin is
a correlated asset.
Bitcoin's fall alongside traditional markets over the first three
months of the year has somewhat undermined the narrative that
it is a “non-correlated” asset but the bigger picture may be more
important for this debate. Available data neither confirms nor
denies the status of bitcoin and other digital assets as non-
6. VIRTUAL CURRENCY
On January 6, the Virtual Currency Fairness Act was
introduced to the House. The bill "excludes from
gross income, for income tax purposes, up to $200
of gain from the disposition of virtual currency in a
personal transaction." In short, this would encourage
every day use of cryptocurrency, and not just
IDEX Quarterly Insights Report, Q1 2020 2
Among tax experts, the type and timing of staking income is a
hot topic of debate. In the absence of IRS guidance, staking
rewards could be comparable to rental income, taxed at the time
of the receipt. Meanwhile, others argue that staking rewards
should be taxed only at the time of disposal. The controversy
continues to be an ongoing debate.
THE IRS VIRTUAL CURRENCY
On March 3, the IRS held a first of its kind Virtual Currency Summit at
the IRS headquarters in Washington, DC. The invite-only attendees
included stakeholders in the crypto community such as exchanges,
crypto tax software companies, tax practitioners, and advocacy
groups. The summit shows the IRS's efforts to learn more about the
crypto industry and the intricacies of compliance challenges.
Download our 2020 Cryptocurrency Tax Preparedness Guide for a
better understanding of your crypto tax obligations.
Due to the impact of COVID-19, the US government
is granting Americans an extra 90 days to prepare,
file, and pay their taxes. However, tax experts
continue to advise Americans to file early. For those
heeding this advice, there are several noteworthy
developments from Q1 to note.
Formerly, gaming tokens also fell under the category of virtual
currencies per the IRS's answer to “What is Virtual Currency”
section. By early February, the IRS suddenly deleted this
guidance from the website. If the guidance stood, millions of
gamers and parents of gaming kids would have new
responsibilities detailing every in-game transaction.
2019 SCHEDULE 1
Starting this year, US taxpayers will have to start answering the
question “At any time during 2019, did you receive, sell, send,
exchange, or otherwise acquire any financial interest in any
IDEX Quarterly Insights Report, Q1 2020
TOTAL MARKET CAP
Total market cap indicates the value of the entire cryptocurrency market. It is the sum of the market cap of all coins that are in existence in the cryptocurrency space.
There are currently a total of 5,295 coins and tokens, and total market cap measures the size of this entire market. This value can help identify the strength and potential of the cryptocurrency
market at a given point in time.
IDEX Quarterly Insights Report, Q1 2020 4
Trade volume indicates the total trading volume of all coins the exchange supports. Volume can be used to gauge the liquidity of an exchange; higher liquidity means more market participants
and trading activity. A larger group of participants can pull prices toward equilibrium faster and match trades quicker.
Volume also indicates the size of the exchange and helps traders establish a ranking for the market.
9. THIS QUARTER, WE ADDED 18 NEW TOKEN LISTINGS.
IDEX Quarterly Report, Q3 2019
01/02/2020 PegNet PJPY
01/02/2020 PegNet PINR
01/02/2020 PegNet PRVN
01/02/2020 PegNet PDCR
01/02/2020 PegNet PZEC
01/02/2020 PegNet PBNB
01/02/2020 PegNet PLTC
01/02/2020 PegNet PXMR
01/02/2020 PegNet PXLM
01/02/2020 PegNet PDASH
01/07/2020 Dai DAI
01/24/2019 Unochain UNOC
02/24/2020 Karat Gold Coin KBC
02/26/2020 Unibright US UBT
02/27/2020 Algory ALG
03/09/2020 The 4th Pillar Token FOUR
03/18/2020 LCX LCX
03/30/2020 Parsiq Token PRQ
10. ARE THE STAKING REWARDS FUNDED
THROUGH INFLATION OR FEES?
Many cryptonetworks are funded by inflation. In
these models, users stake their holdings to earn
more of the staking token issued by the protocol
itself. While this increases the total supply of the
underlying token, it also has a couple of implications:
IDEX Quarterly Insights Report, Q1 2020 6
• Stakers earn a proportional payout of the new tokens. If the
majority of users in the network participates, then the overall
proportion of ownership remains unchanged—no one gains.
• For the supply that’s not staked, owners will see their share
decline compared to those who have staked.
Inflation funded staking may work in the early days, but for
staking programs to last for the long term, staking compensation
must transition from inflation funded to network fees.
participation in the network. And in many regions, stakers will end up
selling a portion of their rewards to pay taxes. It’s important that other
uses drive value for the token in order to combat these pressures.
In 2019, another use for cryptocurrencies continued
to gain momentum—staking tokens for yield. Several
things have happened since—more users have
begun staking tokens, more staking opportunities
than ever are now available, and staking programs
have felt pressure to advertise incredibly high yields
to remain competitive.
Given this landscape, is it still a good idea to
participate in staking?
To ensure you’re making safe and potentially
profitable decisions, ask yourself these questions
before you stake.
ARE PAYOUTS MADE IN THE STAKING TOKEN?
Many staking programs offer compensation paid in the staking
token. As you likely want to see projects you hold a stake in
grow, look for networks that support additional use cases and
demand for the underlying token outside of staking collateral.
Alternatively, look for opportunities that pay stakers in ETH or
For example, IDEX stakers earn 25% of the trade fees from
IDEX in ETH for their role in helping run the platform. The
payout is denominated in a separate asset that has its own
demand and liquid markets (ETH is the “second best”
This question is important because stakers face several
pressures that depend on the value of the token reward. Some
portion of the earned tokens will get sold back into the market.
Stakers must be able to cover costs associated with
Real Return vs. Inflation
The IDEX staking reward program compensates node operators using
trade fees from the exchange. Historical yields have averaged 12%
throughout the life of the program. There are no inflation mechanics at
plan, as the IDEX staking network has already reached a sustainable
level of compensation based entirely on the usage of the underlying
Rewards Paid in ETH
IDEX collects fees in both tokens and ETH. The token fees are
converted to ETH prior to being paid out to stakers. Unlike other
networks, the payout is denominated in an exogenous asset with its
own demand and liquid markets (it’s the “second best” cryptocurrency
available). Because IDEX distributes staking rewards in ETH, IDEX
and its token remains unaffected when stakers choose to cash out to
cover infrastructure or tax costs.
Learn more IDEX staking.
Buzz Crypto communities namely exist in the online sphere but that
has not deterred the rapid spread of news, debate, and hot
topics. Rather, it has fueled robust conversation and rapid
spread of controversial topics.
Here are several of this quarter’s buzzworthy topics.
DEX VOLUME ATH
The total volume for non-
custodial and DEXs hit an all-
time high of $668 million in
March, according to Dune
IDEX Quarterly Insights Report, Q1 2020
STEEM HARD FORK
The Steem community
successfully hard forked to
remove Justin Sun’s Steemit
Inc. Tokens from the new
The US SEC's Office of
Compliance Inspections and
Examinations (OCIE) outlined its
priorities for 2020, including its
views on the oversight needs
posed by digital assets.
Under pressure from regulators,
Facebook has decided to offer
users digital versions of
in addition to the proposed Libra
12. Make a Trade
Make your next trade IDEX.
Next Steps to Consider
Get Your Taxes Done Faster
Import your trade history from IDEX
and get started for free.
IDEX is a leading DEX on Ethereum, providing retail and institutional customers with a secure, trustless, and real-time trading experience backed by transparent
blockchain settlement. By managing trade matching and Ethereum transaction dispatch off-chain, IDEX eliminates mining delays and enables continuous trading,
multiple simultaneous orders, and zero-fee cancellations.
IDEX Quarterly Insights Report, Q1 2020 8
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