Cryptocurrency Tips To Help You Start Investing
Crypto Double D have come up with some tips to help any beginner learn how to avoid common cryptocurrency mistakes.
DIVERSIFICATION IS KEY
It doesn’t pay to have too much invested in one single cryptocurrency. As with stocks and shares, spread your money out among different digital currencies. This means you don’t risk being over-exposed should one of them plummet in value – especially as the market prices of these investments are highly volatile.
Set limits on how much you invest in a particular digital currency and don’t be tempted to trade with more money than you can afford to lose.
TAKE CYBER SECURITY SERIOUS
One option to safeguard digital coins is by storing them in offline hardware. The holder has to ensure that the hardware or paper wallet is safely locked. It is also important to keep private keys in safe locations.
CRYPTOCURRENCY IS NOT INSURED
If you store cryptocurrency with a third-party company, and the company goes out of business or is hacked, the government has no obligation to step in and help get your money back.
Copy trading essentially means emulating strategies of big traders or influencers, meaning directly copying the positions taken by another trader. In this strategy, the investors decide the amount they wish to invest and copy the positions taken by the trader that they are following.
COIN CONVERSION RATE
Coin conversion fees will depend on the amount of crypto you’re exchanging, when you are exchanging the currency, and what coin you’re converting it to. Different trading platforms can offer different exchange rates for coins but remember you’ll pay transaction fees to move your cryptocurrency.
When you move crypto coins from your wallet to a trading platform or vice versa, you pay a small transaction fee for doing so. The fee for transferring cryptocurrency between platforms is usually a small fractional piece of a coin.
CRYPTOCURRENCY AND INCOME TAX
Generally, cryptocurrency holdings are not taxed. However, you need to keep records on the cryptocurrency that you buy and hold so that you can report them on your income tax return when you dispose of them. You may sell your cryptocurrency for a profit or loss. When you sell your cryptocurrency, this is called disposing of it and when you do, there can be tax implications.
The profit that you earn from the sale or trade of cryptocurrency is taxable as either capital gains or business income, and you need to report that income on your tax return. To ensure correct reporting, you must keep accurate records of your purchases and sales of cryptocurrency.