Cryptocurrency Popularity - What to Know and What’s Important When Trading in Cryptocurrency

Why is Cryptocurrency Gaining Popularity?

• Convenience
• Privacy
• Geopolitical Uncertainties

As we transition from brick-and-mortar shopping and mail-in payments to online shopping and electronic payments, the convenience and speed of payments with cryptocurrencies are practically instant. There is no waiting for approvals, there is no waiting for bank transfers, which sometimes can take days to process.

In this digital era hacking and identity theft have become paramount issues for most individuals and entities owning a traditional bank account or investment account. Identity theft can also pose a real problem for credit and loan accounts and can take years to clear up. The possibility of losing one’s hard-earned savings or losing the ability to conduct day-to-day financial transactions is a well-founded concern that has helped cryptocurrency gain popularity.

Cryptocurrency has a decentralized structure; as such, it is not reliant on governmental economies or uncertainties. When countries are in turmoil, or are experiencing periods of high inflation, investors and consumers become less confident in the stability of banks and in the purchasing power of money, thus sparking further popularity for cryptocurrency as an alternative means of safeguarding wealth.

What to Know About Cryptocurrency?

Cryptocurrency can be viewed as any type of currency. Currency can be used for purchasing things, paying bills, saving for the future, or investing. The same can be said for cryptocurrency.

With traditional currencies when you save or invest you usually earn interest, receive dividends, and may incur capital gains or losses when you sell your investments. When you receive interest and dividends you report this activity as income on your income tax return; when you sell an investment you record the gain or loss on the sale of the investment as a capital gain or loss on your income tax return.

Banks and brokerage firms usually calculate your earnings and provide you with a detailed annual statement or a government-approved tax form that serves as a tax reporting tool. Regardless of what statements are issued, you should keep a record of your investment activities and earnings particularly when it comes to cryptocurrency; sometimes statements are not readily available for cryptocurrencies and must be calculated manually. Check with a qualified tax professional to help you keep track of your investment sales and income.

Summary

Cryptocurrencies have ups and downs, just like traditional investments do. Fluctuations in value are largely driven by supply and demand. High unit availability usually translates into a lower investment price and, conversely, low unit availability usually translates into a higher investment price.  

Check your investments regularly, determine where your investments are headed, how much income you have earned, and what’s happening with the value of your investments. Cryptocurrencies can fluctuate rapidly and there is no guarantee that you’ll make money. Always check with a qualified professional who can advise you as to what investment strategies best fit your financial and comfort levels. Check back here for further details on cryptocurrency terminology, trends and accountability.