- What should you know about crypto?
- Cryptocurrencies are very volatile. For example, bitcoin could drop 30% in a week and then skyrocket. Buying it is still very speculative as the returns are neither stable nor guaranteed. If you want to try it, you should allocate only a very small part of your portfolio to it. Some advisors are offering 1% for their clients who want to try it.
- If you sell cryptocurrency for cash, exchange it for another crypto, use it to pay for goods or services, pay by crypto or airdrop, or receive crypto as a bonus or reward If so, cryptocurrency gains are taxed at the regular capital gains rate. If you don’t declare your holdings, you could be penalized – just like you would for unpaid taxes. This includes both fees and interest, which can add up.
- What are the advantages and disadvantages of investing in cryptocurrency?
the profit:
- Great Profit Potential: Crypto, such as bitcoin, is the best-performing investable asset of the last decade, but it can also tank quickly, leaving you for nothing.
- Support Emerging Technology: Blockchain technology is affecting almost every sector of the economy and your investment will help support them.
- Diversify Your Portfolio: Even if you are a cautious crypto investor, you can consult your advisor about the benefits of adding a little crypto to your portfolio to diversify with this new topic.
Harm:
- High Risk and Volatility: Crypto is very unpredictable, which is why most money advisors still recommend investing only a little in it, so you don’t compromise your long-term goals if you lose it.
- Vulnerability: There are often reports of thefts, frauds, scams – and people forgetting their passwords too – so there is a greater chance that you could lose your money here compared to more traditional investments.
- If your bank fails, the Canadian Deposit Insurance Corporation will insure up to $100,000 per insured category — including savings and checking accounts, guaranteed investment certificates and other fixed deposits, and foreign currency — for each member institution. But crypto is not covered. So, if your crypto exchange goes bankrupt, gets hacked, or shuts down without notice, you lose it.
- How can you buy cryptocurrency?
- Choose a reputable exchange where you will buy, sell and store your crypto. The bigger ones have become quite user friendly, so check them out. Check:
- Is this a publicly traded company?
- Who controls it?
- How many users does it have?
- How many cryptocurrencies does it offer?
- How easy is it for you to use?
- What does it charge?
- Does it offer any “reward” features for the amount of crypto you buy?
- Can you withdraw your private key to a cold wallet to take it offline?
- Decide how much cryptocurrency you should have in your portfolio: This is where your financial advisor can definitely help you find the right balance. Considering how risky and volatile cryptocurrencies are, you may want to keep a minimum in your portfolio if you have identified in your financial plan that your goal is to grow your money and invest it to meet your long-term objectives. Whether it is buying a home or retiring.
- Securely Store Your Private Keys in a Wallet: Once you buy some crypto, you’ll need to figure out how to store your private keys to ensure you have access to your investments. Hot wallets allow you to easily access and trade your crypto and you now have greater security protection. But hackers are also becoming more sophisticated, so more long-term holders are choosing to save their private keys in a cool wall – a USB or hard drive they keep safe.
- Keep Your Investments: Whatever you do, buy crypto and forget about it. You can do this:
- To monitor its long term performance add it to your crypt in your main investment dashboard,
- Regularly check news headlines to monitor regulatory scrutiny of your chosen exchange,
- Monitor which governments are banning or blessing crypto,
- Keep learning about new crypto and changes in the form you choose.
- Which top currencies should beginners consider?
There are currently around 7,500 cryptos, but many of them will not last. While bitcoin is one of the most well-known, most exchanges only offer a couple dozen. Before making your choice, make sure you do your due diligence to ensure that you buy one that is valid and viable for a long period of time.
Some of today’s top rated cryptos are:
- Bitcoin: You will find this on every popular exchange.
- Ethereum: This is the second most popular crypto.
- Dogecoin: Dogecoin was created as a cryptocurrency satire – or joke – in less than two hours. But it has been increasingly fueled by speculation and internet chatter.
- Binance Coin: The world’s largest coin exchange, Binance, owns this coin. But it has become popular as it is widely accepted and lowers Binance’s trading fees.
Given the range, it is difficult to know which one to buy, especially since this entire asset class is very speculative and volatile. So, it may come down to the people you trust. Two that are often mentioned in the wealth management world, and are built into some mainstream funds, are bitcoin and ethereum. Ethereum may have more technical merit, but bitcoin may have more real-world applications. Do your research to make sure you are selecting the right one.
