In this period of strong hype on cryptocurrencies, which are setting new records in value, it is normal to wonder how to start investing in this new asset. But how do you start from scratch? In this article, written with Amelia Tomasicchio, CEO and Co-founder of The Cryptonomist, you will find out how to include cryptocurrencies among your investments.
In reality, it is not as difficult as it may seem, also because at the moment there are very few alternatives to direct investment.
As far as we talk about it, there are still very few derivative instruments or companies to invest in connected to the World of Cryptocurrencies.
The most immediate way to invest in a crypto is therefore to buy crypto directly and hold them pending an appreciation of the same.
In this article
- How to buy cryptocurrencies?
- Coinbase is the most popular platform for investing in crypto
- How to store cryptocurrencies?
- How to make money with cryptocurrencies?
- What to do with cryptocurrencies?
- How are cryptocurrencies taxed?
How to buy cryptocurrencies?
The first thing to do is to buy Bitcoin or other crypto trying to stay away from scams and carefully selecting the platforms with which to buy them.
Unfortunately, the crypto world is full of scams lurking around the corner.
On social media, for example, is full of fake financial promoters who promise hefty earnings in a short time, so you have to be careful.
Consider that in 99% of cases they are scams, sometimes even very poorly structured.
The cryptocurrency selection is also not trivial and today, according to Coinmarketcap, there are more than 4,150 different cryptocurrencies.
Not all of them are equally reliable and this is also one of the reasons why purchases often, at least at the beginning, fall on Bitcoin.
Of course, I advise you to deepen the various projects and not to disdain alternatives to Bitcoin, but to select alternative currencies only after in-depth and constant study.
I then suggest that you allocate only a small percentage of your assets to this category of investment, a percentage to be chosen based on your greater or lesser aversion to risk.
In any case, the purchase date of the main cristobalite is very easy and there are indeed many Exchange reliable places to buy and exchange criptovalute.
Obviously, in many cases, we are talking about companies with a still short history and regulation that is not entirely present, but there are still some platforms that have conquered important market shares more than others.
We will see Coinbase shortly, but other big names in the sector are for example Binance, Blockchain, Bitfinex, Swissborg, and in Italy The Rock Trading, Conio, and Young Platform.
There remains the alternative of purchasing from individuals, possible for example on Localbitcoins.com, which is riskier, often more expensive, but also more anonymous than an online platform.
Coinbase is the most popular platform for investing in crypto
Coinbase is the most famous Exchange and Wallet.
It is quite user-friendly, offers an excellent level of security even if it has higher than average purchase fees unless you use the Coinbase Pro version.
Coinbase is one of the most important American companies in the sector and has been operating since 2012, so it has a long history behind it that perhaps will soon be completed with the listing on the stock exchange.
As a wallet and exchange, it is a platform where you can buy and sell the main cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Bitcoin Cash and even keep them.
The purchase is very simple and you just need to connect your account to a credit/debit card or a current account to buy cryptocurrency.
You can also use your Paypal account for the sale.
Once purchased, the currencies will be available on your account, they can be converted into other cryptocurrencies or transferred.
How to store cryptocurrencies?
Once the cryptocurrencies have been purchased, they will be kept, i.e. kept in a Wallet where they are safe from malicious people.
The choice of the Wallet is very delicate because security is very important when it comes to currencies without materiality.
The wallet will have to keep your keys private and give you the possibility to access your funds securely at any time.
Private keys are important because they always allow you to recover your bitcoins.
In this regard, a distinction can be made between the Custodial Wallet and the Non-Custodial Wallet.
If the wallet is a custodial type, the private keys (seeds) are stored on the servers of the company that offers you the custody service.
This is why many prefer non-custodial wallets where the private keys remain with the user.
However, custody services offered by major exchanges today are also much safer.
Coinbase offers a custodial type custody service; this involves two things:
- If you lose any data you can contact customer support for example to recover passwords or others;
- But on the other hand, if the wallet servers were attacked, you could lose all your crypto.
On the other hand, on non-custodial wallets, such as Metamask, Eidoo, Blockchain.com where no customer support could restore your passwords or provide you with your private keys, the loss could be the same in case of loss of login information.
The non-custodial wallets also include the solutions considered to be the safest of all, i.e. cold storage carried out by holding keys tested on hardware wallets, similar to USB sticks, such as Ledger and Trezor.
In this way, the private keys are kept off the Internet and are therefore in your exclusive possession.
How to make money with cryptocurrencies?
Historically, the price of Bitcoin has marked new increases every year, as can be clearly understood from the Wikipedia chart: taking the same period of each year as a reference, the price of Bitcoin has almost always risen.
In 2020, for example, it went from USD 7,200 to almost USD 30,000.
There are, however, cryptocurrencies that have marked even higher rises, making the wealth of those who invested in them.
Here is the number one way to make money with Bitcoin and other cryptocurrencies is to wait for their revaluation.
The watchword is to pay attention to these crypto investments for various reasons:
- There may be regulatory developments or new scandals that could undermine the safety or credibility of some projects;
- Price volatility and speculation could lead to rapid falls;
- Technological evolution could lead to the development of new alternative monetary systems or the disappearance of some cryptocurrencies.
I think that cryptocurrencies as a category today are here to stay and that it is therefore worth at least to deepen the subject and maintain constant attention to this phenomenon.
What to do with cryptocurrencies?
Crypto price appreciation isn’t the only way to make money.
Once purchased, cryptocurrencies can be deposited on interest accounts such as Block, Celsius Network, Nexo, or wallets such as Binance to accumulate interest.
The interests today are very interesting, for example, Block offers a 6% interest on Bitcoin.
They can therefore really make it possible to obtain a passive income.
How are cryptocurrencies taxed?
There is still no total clarity on the issue of cryptocurrency taxation.
However, it is clear that the state is starting to deal with this matter and that the Revenue Agency wants to tax this investment, at least above certain thresholds.
I also state that I am not a tax advisor, but the prevailing interpretation in terms of taxation is to equate cryptocurrencies with foreign currencies.
From this derives the obligation for those who hold cryptocurrencies to declare in the RW part of the tax return what is held on foreign exchanges, regardless of the amount held.
Capital gains realized only if the average stock of wallets held by the taxpayer exceeds the amount of 51,645.69 euros, for a duration of at least 7 continuous working days in the year, are then subject to taxation at the rate of 26%. tax in question.
Interest obtained thanks to the holding of cryptocurrencies, so-called staking, as capital gains are also subject to taxation and therefore always subject to 26%.
As risky as cryptocurrencies can represent an interesting asset to hold with a view to revaluation and beyond.
They could be a valid investment from a portfolio perspective and included among alternative investments with a view to diversification, even if its correlation with the other investment categories is not yet clear.
No one knows what the piece will be in the future of the various currencies, so I recommend that you always let yourself be guided by prudence and never believe the fuffagurus who have certainties in this regard.
Do not even get scared of losing the opportunity of a lifetime and enter this market only if you understand its logic, functioning, and potential.