Taking cryptic out of crypto
A BANKING and Payments Federation survey last year, said 300,000 people in Ireland have already invested in cryptocurrency.
Bitcoin is the best known of the thousands of cryptocurrencies out there. Financial technology has democratised investing and it is now as easy as clicking a button on your mobile if you want to buy assets, such as crypto.
Looking at the historical price for bitcoin as an example. In April 2017, bitcoin was trading at €2,500. This month it is worth around €63,000. If you’re considering investing because of recent gains, this and other cryptocurrencies come with a warning.
Before you do anything, consider a few things...
Are you financially stable? Newsflash. Buying crypto won’t make you more financially stable. If you are finding it difficult to make ends meet, putting your money into a highly volatile and speculative asset may not be the wisest choice. Only invest if you can afford to lose the money.
Understand it
Before investing in bitcoin or any other cryptocurrency, take the “can you explain it?” test. Can you stand up in front of your family or friends or colleagues and explain clearly how it works, why it exists, and what the hell is blockchain technology?
Diversify: One of the golden rules of investing; don’t put your eggs into one basket. Yes, you may make a killing on bitcoin over a shorter period, but there are significant fluctuations. Holding any asset long term will ensure a better outcome.
Tax: It’s an asset and when assets grow, the Revenue will come looking for their cut. The gains are subject to capital gains tax at 33%. You also have to do a tax return lest you fall foul of the Revenue.
So, with this asset class, as of all investment asset classes like stocks, property, bonds and funds, take professional advice and understand the risks.