If you are a seasoned Cryptocurrency investor, you already know that it’s been a bumpy ride. If you are new to the game, you are probably filled with questions as you take those first tentative steps. Of course, you have likely noticed the year-long bear market that Cryptocurrencies faced in 2018 and are wondering if this will continue. And you are probably asking yourself if this is the best time to be getting started.
Bitcoin, the largest and oldest of the Cryptocurrencies, had a close encounter with the $20,000 price level in late 2017. As of this writing, it trades at around $3,800. Yes, 2018 was a major disappointment, but that does not mean Cryptocurrency investing is dead or even on life support. Anyone contemplating an investment, however, should go into it with eyes wide open.
Here are ten things to consider:
- If you are going to invest, ignore all the noise
There are some in the financial media who are embracing the prospects of Cryptocurrency, and there are quite a few calling it a scam or just a fad. Both sides are making plenty of noise, so it’s best not to pay close attention to any of it. Treat your investment as you would any other: buy it, hold it, and ignore the loud voices around you.
- Perform due diligence
There is no excuse for investing without understanding the product you are buying. This is the digital age and researching the underlying asset of any investment has never been simpler. Most coins have whitepapers that can be accessed online, and a good place to find them is at sites like All Crypto Whitepapers.
- Bitcoins are scarce
Dollars, euros, and yen have an unlimited supply, but an underlying algorithm controls the number of bitcoins. There are only 21 million Bitcoins to mine, and approximately 17 million have been mined already. And, as time goes on, they will become harder and harder to mine.
- Bitcoin’s Price
Bitcoin’s price is set by whatever people are willing to pay. As of March 1, 2019, it was trading at $3808. That price is for one Bitcoin, but exchanges will allow investors to purchase less than one Bitcoin.
- Bitcoin is not the only Cryptocurrency
In fact, there are 2526 other forms of Cryptocurrency out there as of March 1, 2019. Here are the top ten:
- Bitcoin Cash
- Cryptocurrency is treated as personal property for tax purposes
As an asset, Cryptocurrency is treated as personal property for federal income tax reporting purposes. A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency. Check out this IRS publication for more Q & A’s on Cryptocurrency.
- Price Volatility Will Be Low
Compared to the severe price volatility in 2017, Bitcoin’s fluctuations in 2018 were more subtle. Many Crypto experts believe that trend toward stability will continue in 2019. If so, the Crypto industry could attract more institutional investors that are typically uncomfortable with rapid fluctuations.
- More companies are accepting Bitcoin for payment
More companies are accepting Bitcoin and other Cryptocurrencies as cash payments for goods or services. Microsoft, PayPal, Overstock.com, Subway, and Gap are just some of the well-known businesses. There are even Bitcoin-powered credit cards arriving on the scene.
- How to Secure Bitcoins
Bitcoins are a target for hackers and scammers, so it’s crucial to secure them. Check out TREZOR, a hardware wallet, or Ledger Nano, a security company that offers secure Bitcoin storage devices.
- Many investors do not know where to buy Cryptocurrency
Here’s the short answer:
- Find a Bitcoin exchange
- Trade your local currency, like U.S. dollar or Euro, for bitcoins
- Move your bitcoins into a secure Bitcoin wallet (see #9)