Cryptocurrency Thoughts
In the simplest of definitions, cryptocurrencies are digital money that allows for direct person-to-person transfers, without the need for an intermediary (ie: a bank). Electronic transfer systems like PayPal or Venmo have been around for decades and continue to be simplified, but they are built around an intermediary system. Cryptocurrencies are designed to bypass that system (for many, this is seen as a way to bypass oversight and is an aspect of the interest driving the growth).
Why does everyone seem to be talking about Bitcoin?
Cryptocurrency has been showing up everywhere this year. With celebrity endorsements and companies pushing their own free capital into different platforms, one can’t help but begin to ask more about it. With a market valuation of over $1 trillion dollars (at the time of writing this), Bitcoin has asserted itself as a top-dog in the crypto-world. But there are thousands more out there.
You can find information to support a belief that digital currencies are either too new and becoming grossly overvalued or that they are just in their infancy and have an infinite amount of growth in front of them. Although I firmly believe they are here to stay, I personally lean towards the side of overvaluation in the short term. One thing for certain is that it is a very speculative commodity and isn’t fitting for just anyone to rush out and buy some. The most speculative investments are enticing as they carry the chance for significant rewards, but also a high risk of loss.
Resources
Are you still reading this and want to know more? There many sites like Coinbase or Coindesk where you can begin to read about everything from the blockchain (crypto-“infrastructure”) to wallets (the different ways you store it). You can spend days reading and learning, so use your time wisely and start with the fundamentals before you go further.
Taxes
If you’ve already traded some form of cryptocurrency on your own, or plan to, don’t forget about the taxman. There are tax considerations on gains and losses realized, and in most cases, it’s either a preferential long-term capital gains rate or short-term ordinary-income rate. Here is a lengthy write up I found helpful if you want to dig into it for your specific situation: https://koinly.io/cryptocurrency-taxes/
I still consider my knowledge to be rather limited on this topic, but I am regularly researching it as it takes a more permanent root throughout our traditional financial system.
Connect with me if you want to discuss the topic and I’ll be happy to share further knowledge and education about the various ways you could invest in cryptocurrencies and the systems they run on.
