How To Determine What Cryptocurrency To Invest In

Where Is This Coin/token Listed

Some coins are only available on certain exchanges, some only available on decentralised exchanges . Exchanges themselves carry a certain level of risk

• Does the exchange make an effort to identify and verify the identity of their users? ).
• Will the exchange have enough liquidity to allow me to withdraw my funds/assets?

Hence I keep my trading to a handful of exchanges.

• Binance

Apart from the above glimpse of what I consider when making a decision on which assets to invest in, I also spend time to look at trading charts to determine a buy in, take profit and stop loss points. I dont invest a lot in one go I try to invest a little periodically to ensure dollar cost averaging.

Disclaimer: This is not financial advice.This information is general in nature and has not taken into account your personal financial position or objectives. Please refer to a licensed adviser or tax agent and relevant PDS for product details before making any investment decisions.

What Is The Difference Between Cryptocurrency Etf And Shares

In the case of foreign markets, they are identified by the ETF designation and their shares are traded on global cryptocurrency exchanges or trading platforms. Note: Keep in mind that most developing countries don’t even allow mutual financing in cryptocurrencies as they believe that investing in mutual funds can lead to inappropriate investment.

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How Do I Protect Myself

If youre looking to buy a cryptocurrency in an ICO, read the fine print in the companys prospectus for this information:

• Who owns the company? An identifiable and well-known owner is a positive sign.

• Are there other major investors who are investing in it? Its a good sign if other well-known investors want a piece of the currency.

• Will you own a stake in the company or just currency or tokens? This distinction is important. Owning a stake means you get to participate in its earnings , while buying tokens simply means you’re entitled to use them, like chips in a casino.

• Is the currency already developed, or is the company looking to raise money to develop it? The further along the product, the less risky it is.

It can take a lot of work to comb through a prospectus the more detail it has, the better your chances its legitimate. But even legitimacy doesnt mean the currency will succeed. Thats an entirely separate question, and that requires a lot of market savvy.

But beyond those concerns, just having cryptocurrency exposes you to the risk of theft, as hackers try to penetrate the computer networks that maintain your assets. One high-profile exchange declared bankruptcy in 2014 after hackers stole hundreds of millions of dollars in bitcoins. Those arent typical risks for investing in stocks and funds on major U.S. exchanges.

» Learn more: What is bitcoin?

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Assess The Marketing And Advertising

Unlike assets like gold or real estate, there is no widely-accepted fundamental reason to invest in a cryptocurrency. Rather, people do so for any of the following reasons:

• They want to make money
• They find it interesting
• They believe in the technology
• They are conspiracy theorists
• They want to hide their money

The only way for a cryptocurrency to rise in value is for demand to outstrip supply. That is, the more people buy it, the higher its price will go. Unfortunately, the majority of purchasers are convinced by the hype, rather than facts. People are talking about it. Its in the news. Their friends are investing. Its everywhere on social media. There are even internet memes, affiliate and coaching programs sprouting.

For that reason, the best way to decide which cryptocurrency to invest in is to analyse the marketing potential.

• Are any big names or gurus online promoting it?
• How professional is the website?
• Do intelligent-sounding people support it?
• Could it catch fire on social media?
• Is there talk about accepting it as mainstream payment?
• Whats the marketing angle ?

To be blunt: how easy will it be to convince uninformed people to buy in?

Indeed, the smartest group of computer scientists could develop an incredible cryptocurrency. But it wont matter if nobody knows about it. You need great marketing and advertising to be successful. Its exactly like a pump-and-dump stock scheme, but just with a different product.

Can You Buy Bitcoin On Vanguard

As a reminder, Vanguard does not have a Bitcoin fund and has no plans to launch one in the future. If you have a Vanguard account, you can use it to buy bitcoin, but only through the Grayscale Bitcoin Trust. This can be a great option for those who are not necessarily interested in trading or issuing cryptocurrencies themselves.

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What Crypto Currency Should I Invest In Right Now

Bitcoin, arguably the best cryptocurrency to buy right now, was developed as an alternative to fiat currency, with the main goal of enabling users to securely transfer value without relying on banks or financial institutions. However, not all cryptocurrencies are designed as a simple substitute for cash.

How Does It Work

Cryptocurrencies are not backed by a central authority such as a government. Instead, they run across a chain of computers. It is exchanged from peer-to-peer on the web without a middleman.

Cryptocurrencies are decentralisedwhich means no government or bank manages how theyre made, what their value is, or how they will be exchanged. All the crypto transactions are secured by cryptographymeaning that it only allows the sender and intended recipient of a message to view its contents.

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Look Out For Obvious Signs Of Scam

Good coins have a transparent technical vision, an active development team, and a lively, enthusiastic community. Bad coins are not transparent, promote fuzzy technical advantages without explaining how to reach them, and have a community that is mostly focused on getting rich quickly. Perhaps the worst kind of cryptocurrencies are MLM coins like the now infamous scam Bitconnect.

We will talk more about Bitconnect in a bit. For now, here are some of the more obvious signs of scam.

It really goes without saying that the success of a project is directly related to the credibility of the team. Lets put it like this: if you are investing your money into a company, wouldnt you want to know that the company is in good hands and that your money is going to be appreciated considerably?

One of the most successful new projects of the current 2020-2021 market cycle is Uniswap. Although created in 2018 by ex-Siemens engineer Hayden Adams, Uniswap saw incredible success later on in 2020-2021. In March of 2021, it was generating fees of approximately $2-3 million dollars daily for liquidity providers who create a market for buying and selling on the platform.

Now, compare that to this team:

Yesyour eyes are not deceiving you, thats Ryan Goslings photo on the team page.

Of course, most of the time, bad investment advice wont be this easy to detect. But there are steps you can take to thoroughly research the projects team and ensure their credibility.

How To Buy Cryptocurrency On A Centralized Exchange

The exchange serves as one of the most critical functions in the crypto ecosystem. It basically acts as a portal between the fiat world and the crypto world the on-ramp if you will. Centralized exchanges help you buy Cryptocurrencies in exchange for fiat money . Coinbase is a perfect example of this kind of exchange. Coinbase lets you exchange your fiat for crypto with its easy to use app.

If youre wondering why you have to go through the lengthy and arduous process of signups and verifications to purchase crypto, the answer lies in the various Know Your Customer and Anti-Money Laundering laws that centralized exchanges are legally obligated to comply. Some exchanges avoid this process by simply not allowing you to deposit your fiat dollars into the exchange, and limit transactions to be between crypto-to-crypto, as opposed to the fiat-to-crypto that requires AML laws to be observed by the exchange.

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Example : Trading One Type Of Cryptocurrency For Another

On July 30, 2018, Francis bought 100 units of Ethereum, which had a value of $20,600. For this purchase, Francis used 2.5061 Bitcoins, which were trading at $8,220 per unit on that day, or the equivalent of $20,600. We consider that Francis disposed of those Bitcoins. Francis originally bought those Bitcoins for $15,000 and exchanged them for 100 units of Ethereum at a value of $20,600, resulting in a capital gain. It is calculated as follows:

$20,600

– $15,000

$5,600 capital gain

$5,600 capital gain taxed at 50% = $2,800 taxable capital gain

If, on the other hand, the original purchase price of the 2.5061 Bitcoins had originally been $25,000, but at the time that Francis exchanged them for 100 units of Ethereum they were worth only $20,600, he would have a capital loss. It is calculated as follows:

$20,600

– $25,000

$4,400 capital loss

$4,400 capital loss × 50% = $2,200 allowable capital loss

This example assumes that the cryptocurrency in question was held as an investment on account of capital however, if this transaction occurred in the course of conducting a business, the entire amount of $5,600 would need to be reported as income in the first transaction and the entire $4,400 would be reported as a loss in the second transaction.

How To Buy Cryptocurrency

Where you buy your cryptocurrency will depend on which cryptocurrencies you want to invest in. If you are only interested in the big three, then you dont have to open a trading account.

The big three cryptocurrencies are:

• Litecoin

A site like Coinbase is all you need. They dont offer any trading capabilities, but they do make it easy to purchase these coins with a credit card or bank account.

If you want to buy smaller cryptocurrencies, then that is when things get a little more complex. Some cryptocurrencies are only listed on select exchanges.

So you will have to do your research to see where you can buy that cryptocurrency. For example, if you want to buy IOTA, you will need to open a trading account at Bitfinex because that is the only exchange where it is currently traded.

However, Bitfinex does not allow US customers to purchase cryptocurrencies with US Dollars. If you are a US customer, you would need to first buy Bitcoins from a site like Coinbase.

Then you have to transfer those Bitcoins to your Bitfinex account. Once those coins have been transferred, you can use that balance to purchase IOTA.

Other websites like ShapeShift and Changelly can help you trade Bitcoins to another type of currency, without setting up an account. The coin options are limited, but if a coin is available, they can save you the hassle of setting up an account.

Alright, now that you have purchased some cryptocurrency, its time to store it somewhere safe.

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Tax Treatment Of Cryptocurrency For Income Tax Purposes

Cryptocurrency is a digital representation of value that is not legal tender. It is a digital asset, sometimes also referred to as a crypto asset or altcoin that works as a medium of exchange for goods and services between the parties who agree to use it. Strong encryption techniques are used to control how units of cryptocurrency are created and to verify transactions. Cryptocurrencies generally operate independently of a central bank, central authority or government.

The following pages outline the income tax implications of common transactions involving cryptocurrency. When we refer to cryptocurrency in this publication, we are talking about Bitcoin or other similar virtual currencies.

Youre Likely Investing In A Scam

Since you cant thoroughly research a cryptocurrency, its impossible to tell whether it is legitimate. For example, how do you actually know if theres a mathematical foundation to the coin? Unless you have seen the code and understand the relevant algorithms, you dont.

For instance, personally, I believe that Bitcoin is real. I think it would be almost impossible to commit a fraud of that scale. But I dont know who created it, how the algorithms were developed, where the information is stored and what Im mining. All I know is what I read on the internet. And if you blindly trust what you read online, then I know a Nigerian prince who wants to talk to you.

I also admit that my perception of Bitcoin is influenced by:

• The public attention it has received
• The introduction of Bitcoin futures
• Its length of time in existence

But, again, none of those are sound research principles.

If my assumptions about Bitcoin are correct, then it would take an incredibly smart group of people to create any legitimate cryptocurrency. It would require sophisticated backgrounds in computer science, mathematics and programming. Craig Wright, who claims he invented Bitcoin, has two Masters degrees and a PhD.

Note: cryptocurrency websites usually appear impressive and have great marketing material. That doesnt make them legitimate!

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What Is Binance And Can I Still Use It In The Uk

The UK financial watchdog has blacklisted cryptocurrency exchange Binance and banned it from carrying out any regulated activity over concerns about its money laundering controls.

The regulator has also ordered the company to stop any form of advertising in the UK.

Binance isnt based in the UK, so the British regulator doesnt have the power to stop investors from buying and selling cryptocurrency using the exchange. However exchanges do have to register with the FCA to operate in the UK.

This is a clear warning that investors should be very cautious.

Why To Invest In An Etf Vs A Mutual Fund Vs

When tracking a standard index, ETFs are more tax efficient and more liquid than mutual funds. This can be an ideal option for investors looking to get rich in the long run. It is generally cheaper to buy mutual funds directly through a family of funds than through a broker.

Robinhood Unsettled Funds are the pending proceeds of an inventory sale transaction on Robinhood. As a stockbroker, it bound Robinhood to the Securities laws, notably the waiting time rule. SEC laws compel you to wait until after you sell stocks you get funds. Robinhood has eliminated trading commission expenses and reduced the barrier to daily stock, crypto-monetary, and ETF investments.Robinhood Unsettled FundsRobinhood has eliminated trading commission expenses and reduced the barrier t

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How To Store Cryptocurrency For A Long

Before we get into actual investing strategies, lets talk about keeping your investment safe. You should NOT hold cryptocurrencies at an exchange or in an online wallet for an extended period of time.

If you are actively trading cryptocurrencies, then you will probably have to keep at least some of your coin at an exchange, so you can get in and out quickly.

But exchanges and online wallets can be hacked and poorly run exchanges can even fold. So whenever humanly possible, get your coins into a wallet that you control.

These options are called cold storage because they can be taken offline and therefore arent hot.

Here are your four cold storage options:

What Makes Cryptocurrencies Different From Fiat Money

Fiat money money like the American or Canadian dollar is issued by the government, meaning theres a central authority that controls its value, interest rates, and supply . Many view this degree of government involvement in the mechanics of the free market as manipulation and as an archaic attempt to manage a vast and complex economic system. A noble intention at best, a catalyst of hyperinflation that makes wealth building very difficult for the average person, at worst.

Cryptocurrencies, on the other hand, are decentralized all transactions are done peer-to-peer or through smart contracts and theres no authority overseeing them. Many people consider this a massive advantage over traditional money, because it gives them full control of their assets.

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Do Not Ignore Tokenomics

Tokenomics in actual sense talks about how and why a token is implemented within an ecosystem for easy adoption by the people for a transaction of goods and services and other uses. It is also described as the design of a token or cryptocurrency and also, the framework within which the introduced asset functions. To successfully launch a coin into the market, there is a framework within which the fate of the token can be decided. The question of why the cryptocurrency was issued and how this was done defines whether its tokenomics is good or not. In other words, the tokenomics defines how well a cryptocurrency or token has been designed and, it provides a good insight into its future performance. Making this easy, a well-designed cryptocurrency must have the ability to resist inflationary pressure, must have utility in its ecosystem, must be fungible and be able to store value. A well-designed token must also incentivize its use, must be scalable, must be accepted by people at large and more importantly, and must be traded on exchange platforms. It must be able to reward users and investors for being early adopters of the asset, and must also reward users for bringing new users on board as part of its marketing strategy.

How To Store Your Cryptocurrency

When we say send it to your wallet, we dont mean you put your Bitcoin into an actual wallet. To store your currency, you need a cryptocurrency wallet, which is necessary to securely store the code that makes up your cryptocurrency portfolio. You can have either a software wallet or a hardware wallet. Software wallets are necessary to enable active trading, as they make accessing your currency much easier. If you sign up for a Coinbase account, you automatically receive a Coinbase software wallet.

Hardware wallets are physical devices they look a bit like USB drives and they are more secure than software ones. You can use them for currency that you dont expect needing frequent or easy access to. Think of a software wallet like a checking account, whereas the hardware wallet is more like your savings account.

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