Learning about investing in cryptocurrency
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STEX CRYPTO
Cryptocurrency miners and validators earn rewards in crypto, which they can either hold as investments or exchange for another currency. How to Buy Cryptocurrency from an Exchange If you want to invest in cryptocurrency directly, then you can use a cryptocurrency exchange.
Here's how to buy cryptocurrency through an exchange: Choose which cryptocurrency exchange you want to use. Your best bet is a reputable, well-known exchange with a large selection of currencies. Establish an account with the cryptocurrency exchange. You will need to provide your personal information and verify your identity to complete the registration process. Fund your account with fiat money. Before you can buy any crypto, you need to fund your exchange account with another currency, such as U.
Decide which cryptocurrency you want to buy. You can choose to invest in one or many cryptocurrencies. Research your options to help you decide. Place a buy order for your chosen cryptocurrency. Follow the steps required by the exchange to submit and complete a buy order for one or more cryptocurrencies. Store your cryptocurrency in a digital wallet. After your purchase is complete, the information you need to access your cryptocurrency is held in a digital wallet.
That crypto wallet can be hosted either by the cryptocurrency exchange or an independent wallet provider. As an investor in cryptocurrency, you need to decide how much of your portfolio to allocate to digital assets. A best practice among investors is to periodically review your entire portfolio to assess the need to rebalance your holdings. That might mean increasing or scaling back your crypto exposure, depending on your investment goals and other financial needs.
The prices of cryptocurrencies, even the most established ones, are much more volatile than the prices of other assets like stocks. The prices of cryptocurrencies in the future could also be affected by regulatory changes, with the worst-case possibility that cryptocurrency becomes illegal and therefore worthless. Many investors are nonetheless attracted to the potential upside of investing in crypto.
If you decide to invest, it's important to carefully research any digital coin before buying it. The cryptocurrency space is evolving rapidly, so it's also important to pay attention to new developments that may affect your crypto holdings. Cryptocurrency investors need to understand the tax consequences of using crypto , especially if they purchase something or sell their crypto investments. Given the riskiness of cryptocurrency as an asset class, it's especially important not to invest more money in crypto than you can afford to lose.
Is Cryptocurrency a Good Investment? Investing in cryptocurrency is not for everyone. The prices of cryptocurrencies can be volatile, which makes this type of investing likely a poor choice for conservative investors. If you are willing to assume greater risk as an investor, then investing in one or more cryptocurrencies may be right for you. How Can I Invest in Bitcoin? Investing in the stock market is less risky than investing in crypto.
Is Crypto A Good Investment? Hopefully, you now have a pretty good understanding of cryptocurrency. Something happens that drives a large number of people to purchase Bitcoin: Endorsements: Public figures or business leaders promote Bitcoin, which entices a larger number of people to buy. Press: Bitcoin enters the public consciousness due to a movie, article, or journalistic piece, and it leads to an increase in purchases. Manipulation: Stock manipulators purchase a large number of Bitcoin units.
They contact hundreds or thousands of amateur investors and convince or coerce them to purchase units, as well. When everyone starts buying the cryptocurrency, the value of each crypto unit increases sharply. But remember: crypto is a volatile asset, and the value may fall as quickly as it rises.
If you sold your units early, you could make a huge return on investment. The cryptocurrency could fall dramatically in value in just a couple of days or even a couple of hours. Know that cryptocurrency has generally been decreasing in value year to year.
First, you should prioritize low-risk investments, like bonds and rental properties. Then you should plan some medium-risk investments, like stocks or fix-and-flip properties. A high-risk investment, like cryptocurrency, should only be the tip of your investment pyramid.
Like all high-risk investments, you should try and generate a passive income that can adequately absorb any losses you might take on crypto. Advantages Of Investing In Cryptocurrency Investing in cryptocurrency is popular because it provides several advantages, such as diversification, return potential, and utility.
Investors like to diversify portfolio as a way to spread risk, but also to increase the odds of striking gold. Crypto is a popular option for diversification because it has offered strong returns, as especially the number of crypto uses and applications increase.
Investors can use crypto to pay for goods and services, for example. Disadvantages Of Investing In Cryptocurrency However, be aware that cryptocurrency also comes with some drawbacks to consider. Enter at your own risk. Protecting Yourself While Investing In Cryptocurrency You must take extra steps to protect yourself — and your capital with any investment type. There are a few common concerns when it comes to cryptocurrency: credibility, security, privacy. Many investors are skeptical of crypto platforms and are hesitant to start investing.
Look up who owns the marketplace you are interested in and gather more information about them. Research how old the company is and in what stage of development the platform is in. For this reason, it is crucial that you fully understand the marketplace you choose to work with.
It is not uncommon to choose platforms high profile investors are known to work with as a starting point. This, along with a sound company structure, can help serve as a sign of stability for that marketplace. As you continue to learn how to invest in cryptocurrency, take the initiative to read the fine print before you start an account. This information can help provide you with peace of mind and let you know exactly how secure your investment will be.
Summary Cryptocurrency is a digital asset that uses blockchain technology to assign ownership to each unit. The value of cryptocurrency depends entirely on the demand in the crypto market—cryptocurrency units have no intrinsic value. Just open an account at a cryptocurrency exchange, which acts as a broker. Click the banner below to take a 2-hour online training class — and learn how to launch your portfolio today!
The information presented is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing provided shall constitute financial, tax, legal, or accounting advice or individually tailored investment advice. This information is for educational purposes only.
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CRYPTOCURRENCY 2021
Investing in cryptocurrency is risky, so it's important not to invest more money than you can afford to lose. Different Types of Cryptocurrency Investing When you think of investing in cryptocurrency, you might think about buying and holding one or more crypto coins. Buying cryptocurrency directly is probably the most common way to add crypto exposure to your portfolio, but when it comes to investing in cryptocurrency, you have a few different options: Buy cryptocurrency directly: You can choose to directly purchase and store one or more cryptocurrencies.
Your options range from the most established digital currencies like Ethereum and Bitcoin to virtually unknown coins that are newly released in an initial coin offering ICO. Invest in cryptocurrency companies: You can invest in companies with a partial or total focus on cryptocurrency.
Your options include cryptocurrency mining companies, mining hardware makers, companies like Robinhood Markets Inc. PYPL that support cryptocurrency, and many others with varying levels of crypto exposure. You also can invest in companies like MicroStrategy Inc. MSTR , which hold large amounts of cryptocurrency on their balance sheets. Invest in cryptocurrency-focused funds: If you don't want to choose among individual cryptocurrency companies, then you can decide to invest in a cryptocurrency-focused fund instead.
You have a choice of exchange-traded funds ETFs , such as index funds and futures funds, in addition to a range of cryptocurrency investment trusts. Some crypto-focused funds invest in cryptocurrency directly, while others invest in crypto-focused companies or derivative securities such as futures contracts. Invest in a cryptocurrency Roth IRA: If you want to invest in cryptocurrency and also garner the tax advantages afforded by an individual retirement account IRA , then you can consider investing in a cryptocurrency Roth IRA.
Using the services of a crypto IRA provider can also facilitate more secure storage for your cryptocurrency holdings. Become a crypto miner or validator: Perhaps the most direct way to invest in cryptocurrency is to mine it or act as a validator in a crypto network. Cryptocurrency miners and validators earn rewards in crypto, which they can either hold as investments or exchange for another currency.
How to Buy Cryptocurrency from an Exchange If you want to invest in cryptocurrency directly, then you can use a cryptocurrency exchange. Here's how to buy cryptocurrency through an exchange: Choose which cryptocurrency exchange you want to use. Your best bet is a reputable, well-known exchange with a large selection of currencies.
Establish an account with the cryptocurrency exchange. You will need to provide your personal information and verify your identity to complete the registration process. Fund your account with fiat money. Before you can buy any crypto, you need to fund your exchange account with another currency, such as U.
Decide which cryptocurrency you want to buy. You can choose to invest in one or many cryptocurrencies. Research your options to help you decide. Place a buy order for your chosen cryptocurrency. Follow the steps required by the exchange to submit and complete a buy order for one or more cryptocurrencies. Store your cryptocurrency in a digital wallet.
After your purchase is complete, the information you need to access your cryptocurrency is held in a digital wallet. That crypto wallet can be hosted either by the cryptocurrency exchange or an independent wallet provider. Your hot wallet should behave in the same way as a real-world wallet.
You use it to carry a small amount of cash for ease of access. That is all. While transacting with hot wallets is very simple, there is a huge drawback when it comes to them. They are easily hackable. Recent ransomware attacks and previous compromises of large exchanges should be sufficient beacons to newcomers. With your private key, and seed phrase intact, you should be able to restore any wallet painlessly enough.
Pros of Hot Storage A wide number of options, and support for different devices. User-friendly UIs make sending and receiving simple. Cons of Hot Storage Exposed to cybercrime. Sophisticated hackers, ransomware, and other malicious actors are a constant threat. Damaging the device could destroy the wallet. Without carefully backing up private keys, and seed words you could permanently lose your cryptocurrency investment.
For those seeking the most secure form of storage, cold wallets are the way to go. Given the amount of attention that cryptocurrency has been receiving over the last few years, it has unfortunately piqued the interest of attackers. What are hardware and paper wallets? You will get to know about it in a minute.
It provides a safety net against hackers and people with malicious intent since it is completely offline. Cons of Cold Storage It is still susceptible to external damage, theft and general human carelessness. It is not ideal for quick and daily transactions. Setting it up can be a little intimidating for beginners. They come in a few forms but the most common is the USB stick style typified by the Nano Ledger series.
Although many swear by them, hardware wallets are still prone to compromise. This applies to those bought from the company themselves, but particularly if a hardware wallet has been acquired second hand. Under no circumstances should anyone ever use a pre-owned hardware wallet.
Although loss or damage can spell disaster for the unprepared, hardware wallets can be restored. You should keep restoration details in a safe place that only you, and anyone you plan to leave the money to know about. Remember, your restoration details open the wallet. Think very carefully about who if anyone you share them with. Here are some hardware wallets that you can use: Ledger Nano X Keepkey. Paper Wallets for Safety Without a doubt, the safest way to store any cryptocurrency is by using a paper wallet.
By following a few pointers below, you can set one up entirely for free. Of course, this means that keeping a record of them is even more important. What Is a Paper Wallet? To keep it very simple, paper wallets are an offline cold storage method of saving cryptocurrency. It includes printing out your public and private keys in a piece of paper which you then store and save in a secure place.
The keys are printed in the form of QR codes which you can scan in the future for all your transactions. The reason why it is so safe is that it gives complete control to you, the user. You do not need to worry about the well-being of a piece of hardware, nor do you have to worry about hackers or any piece of malware. You just need to take care of a piece of paper. Do You Need a Paper Wallet? The answer to this question will largely depend on your circumstances. The paper wallets that you can use are as follows: For Bitcoin , Litecoin, Dogecoin etc.
Do I Need to Do Crypto taxes? Disclaimer: We are no tax bureau nor tax consultants. If you have issues with taxes, and if large sums are at stake, you better ask your local tax consultant. Right now there are only a few tax consultants who know how to deal with cryptocurrencies. But it can be safely assumed that the number is growing quickly and that cryptocurrencies will soon be a standard issue for tax experts like securities, shares, ETFs and real estates are.
All we can provide here is an overview of the typical issues with cryptocurrencies and taxes. No Free Lunch Nothing is for certain, except death and taxes, and crypto is no exception. If you earn money by investing in cryptocurrencies, you likely have to pay taxes. Cryptocurrency investment tax returns are dependant on your regional and national tax regulations. Nearly every country of the world exempts cryptocurrencies from VAT.
Another piece of good news is that in some jurisdictions you have to pay nearly no taxes. Amazingly Germany, a country usually known for very high tax rates, has become a tax haven for cryptocurrencies. Like the USA and many other countries, Germany considers Bitcoin not a financial product, but a property. You bought 10 Bitcoins for 1, Euro and sold them for 2,? Your taxable income increased by 10, Euro.
You bought one bitcoin for Euro and ordered a Euro-pizza when the price was 1, Euro? Your income increased by 9 Euro. In most cases, the tax rate for this is higher than for financial gains. However, there is a loophole. This rule was added to dis-incentivize day trading of other properties and stabilize prices by incentivizing holders. For cryptocurrencies it made Germany, and also the Netherlands, which apply the same rules, to tax havens.
Some countries might have similar rules. In doubt, your tax advisor can help you out. One problem the one year rule poses is that you need to prove that you hold the crypto for this timeframe. Usually, exchanges can help you with prints of your trade history. Also, you can use the public blockchain as proof of storage. In most cryptocurrencies, it is transparent when coins are received and spent by a particular address.
But not in all. For example, Monero uses Ring Signatures and Confidential Transactions, which are great tools to maintain anonymity. But the downside is that they make it more or less impossible to prove that you hold coins for more than one year. Maybe you take this into account when selecting coins for your portfolio. Conclusion: How To Invest in Cryptocurrency If you use a good exchange and keep track of your trades, taxing Bitcoin is possible, but also complicated.
You need to calculate every single profit, not just from cryptocurrency trading, but also from using Bitcoins to pay for things. Things become really a complicated nightmare if it comes to Altcoins. For the tax authorities, an Altcoin counts like Bitcoin. In most countries, this means it is not a financial product, but a property. If you buy it with Bitcoin and sell it for Bitcoin, you have to tax the difference, but not in Bitcoin, but in Dollar or your national paper money.
This means, you not only need to keep track of all your Altcoin trades, but you also need to take into account the price of Bitcoin when buying and selling. Obviously, this makes things extremely complicated. You can have a bad trade, resulting in getting less Bitcoin back than you invested, but being still, in theory, accountable to taxes, when the price of Bitcoin did soar between your trades. So you lost money in cryptocurrency trading but have to pay taxes for it.
At this moment you should accept the fact that cryptocurrencies are something new and that you are no expert in dealing with your financial authorities. Go for a tax consultant, educate her or him about cryptocurrencies and look forward to talking with confused financial authority officials.
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