Emily Clarke

Top 4 Things to Know About Crypto

Are you interested in investing in crypto? You're not alone! According to some studies, approximately one-fifth of the American adult population has owned cryptocurrency as of 2022. It's widely popular, presenting a unique way to diversify your portfolio and grow your wealth.

But if you're unfamiliar with crypto, it can be overwhelming. Luckily, we've compiled a small list of things you need to know before investing.

1. Cryptocurrency is Decentralized

The biggest draw of crypto is that it's decentralized. Instead of leaving control of assets with a single entity or using multiple intermediaries to perform transactions, crypto operates on a digitally distributed ledger existing across an expansive network. This ledger is known as a blockchain.

The decentralized nature of crypto bypasses intermediaries, making it cheaper, faster and more effective.

2. Cryptocurrency is Volatile

Another important thing to remember is that crypto is highly volatile. Pricing is dynamic and ever-changing. Even if you're not tuned into the crypto world, you've likely heard about the extreme pricing surge of popular coins like Bitcoin.

Investors can take advantage of the volatility to maximize their wealth, but many risks are also involved. Many investors use cryptocurrency tax software to monitor pricing, view transaction history and make smarter investment decisions.

3. There are Tax Obligations

Because crypto is decentralized, many assume you don't have to pay taxes on the money you make through investing. That's not true! The IRS treats crypto the same way as other investments. It's considered a capital asset and is subject to capital gains tax.

Failing to report your crypto earnings could put you in hot water with the IRS, resulting in excessive fines and possible legal action. That's why using cryptocurrency tax software is paramount.

4. There are Other Ways to Invest

Most investors grow their wealth by buying and selling crypto assets, but it's not your only option. You can also put your assets into a decentralized finance (DeFi) protocol. Doing so locks your assets into a liquidity pool, making them available for many financial activities. It's a great way to earn interest.

Investors can also explore other avenues like forking, mining, lending and more.

Author Resource:-

Emily Clarke writes about portfolio management, finance tracking and Consumer SaaS services. You can find her thoughts at track your investments blog.