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1.How to invest in cryptocurrency ?

3 Things to Know Before Investing in the Cryptocurrency Market

1. Cryptocurrency Is Still a Volatile, High-Risk Investment

Cryptocurrencies are very volatile. Bitcoin is a prime example, as it’s not uncommon for it to drop 30% one week and then skyrocket to record highs the next.

Bitcoin might be doing really well compared to when it first gained popularity, but the returns are neither stable nor guaranteed. For example, anyone who bought BTC in late 2021 is sitting on a major loss today.

Bitcoin price - August 2022

If you do buy crypto, we recommend only allocating a small portion of your portfolio to it to start.

2. Cryptocurrency Holdings Are Not FDIC Insured

If your bank fails, your checking and savings accounts will be insured for up to $250,000 each by the FDIC. But if your crypto exchange goes bankrupt, gets hacked or simply closes down with little notice, you’re pretty much out of luck.

Additionally, cryptocurrency is not backed by any government or central bank. That means that there is no one to guarantee the value of your investment. The value of cryptocurrency can fluctuate wildly, and you could lose all of your money if you invest in something that suddenly becomes worthless.

3. Cryptocurrency Is Taxable

Cryptocurrency gains are taxable. The IRS decided to start taxing crypto gains as capital gains in 2014, and has since issued at least 24,000 warnings to the crypto community.

For now, cryptocurrency is considered to be “property” and is subject to capital gains taxes. That means people who buy and sell virtual currencies like Bitcoin could owe taxes on their profits. Also, people who mine digital currencies could be subject to self-employment taxes.

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