Are you Crypto ignorant?

Cryptocurrency often seems like a mysterious realm to those unfamiliar with it, with terms like "Crypto" and "Bitcoin" swirling around without clear definitions. Many wonder if it's possible to have a bank account specifically for crypto and what it takes to open one. They also question where they can use it, how to trade it, if profits are feasible, which ones to trade, and whether capital gains are taxable. These are just a few of the common queries from those who haven't dabbled in cryptocurrency..

Let's unravel the mysteries surrounding crypto and hopefully dispel some of the misconceptions, perhaps even inspiring you to explore this digital currency. It's worth considering, especially given that many countries now accept it as a valid form of payment, and major corporations like Microsoft, Chipotle, and Uber Eats have integrated it into their systems.

First things first, what exactly are cryptocurrencies? Simply put, they're digital tokens, a form of online currency enabling direct peer-to-peer transactions. Unlike traditional currencies such as the dollar or euro, cryptocurrencies lack legislated or intrinsic value; their worth is solely determined by market demand. This characteristic renders them speculative assets, driven by factors like supply, demand, and market sentiment.

The allure of cryptocurrencies largely lies in their decentralized nature, facilitating swift and often anonymous transactions across borders without the involvement of traditional banking institutions. This absence of intermediaries reduces the risk of transaction blocks or fees.

Now, let's address some common questions about crypto:

How many cryptocurrencies exist, and are they all valuable?

As per CoinMarketCap, there are over 23,000 cryptocurrencies, but not all hold practical value beyond generating profits for their developers.

What Are The 10 Cryptocurrencies Right Now, Including Their Market Cap, Share and Price?

Understanding key concepts in the world of cryptocurrency is essential for anyone looking to venture into this digital landscape. One such concept is market capitalization, often referred to as market cap, which denotes the total value of all coins in circulation. Calculated by multiplying the number of coins by their current market price, market cap serves as a crucial metric for assessing a cryptocurrency's dominance and growth potential (see table below).

What is Market Cap and Why Does it Matter?

Market capitalization (or market cap) is the total value of all the coins that have been mined. It’s calculated by multiplying the number of coins in circulation by the current market price of a single coin. In essence, the higher the market cap of a cryptocurrency, the more dominant it is perceived to be in the market. For this reason, market cap is often regarded as the single most important indicator for ranking cryptocurrencies. In addition, it can indicate the growth potential of a crypto and whether it is safe to buy, compared to others.

“Market capitalization shows how much a company (or asset) is worth as determined by the total market value of all outstanding shares.”

Opening a Crypto Account in the US: Requirements?

Opening a cryptocurrency account in the US requires providing certain personal information to comply with regulatory standards. Here are the typical requirements:

1. Legal full name and address.

2. State Identification or Driving License

3. Social Security Number

4. Contact details such as Telephone and Email address

5. Photo/Selfie for verification purposes

Trading Crypto: A Step-by-Step Guide

Trading cryptocurrencies involves several steps, but it's simpler than you might think. Here's a basic guide:

1. Sign up for a cryptocurrency exchange: Platforms like Binance and Coinbase are popular choices for buying and selling crypto.

2. Fund your account: Connect your bank account to your trading account for easy funding.

3. Choose a cryptocurrency to invest in: Bitcoin and Ethereum are among the most popular options, but there are many others to explore.

4. Develop a trading strategy: Decide whether you'll be an active trader (day trading, scalping, or swing trading) or prefer a passive approach like HODLing (buy and hold).

5. Start trading: Execute your trades manually or use automated trading bots to implement your strategy efficiently.

6. Store your cryptocurrency: Use a digital wallet to securely store your crypto assets. There are two types of wallets: hot wallets (connected to the internet) and cold wallets (offline).

Top Five Hot Wallet Apps for Storing Crypto

1. Gurda

2. Exodus

3. Coinbase

4. MetaMask

5. ZenGo

Can You Profit from Trading Crypto?

Absolutely, investing in cryptocurrency can be profitable, but it's essential to recognize that, like trading stocks, it carries risks.

Is cyrpto trading riskier than stocks?

Indeed, crypto trading is generally considered riskier than trading stocks or indices due to several factors such as volatility. Cryptocurrency markets are highly volatile compared to traditional stock or index markets. Prices can experience rapid and extreme fluctuations within short periods, leading to significant gains or losses.

Where Can You Use Crypto for Payments?

Numerous stores and merchants now accept cryptocurrency as a form of payment. Examples include Home Depot, Burger King, Foot Locker, DSW, Lowe's, Krispy Kreme, AMC Theatres, GameStop, Steak 'n Shake, jewelry stores, airlines like Delta, Air Canada, Etihad, and American Airlines, as well as hotels such as Soneva and Pavilions Hotels, among many others.

How does one pay bills with crypto?

The BitPay Card is a prepaid Mastercard that lets you instantly convert cryptocurrency into fiat currency. The currency is then loaded onto the card and can be spent globally, anywhere Mastercard debit cards are accepted. You can also use your BitPay Card for online transactions and ATM withdrawals.

How to Pay Bills with Crypto?

One convenient way to pay bills with cryptocurrency is by using the BitPay Card, a prepaid Mastercard. This card allows you to instantly convert your cryptocurrency into fiat currency, which is then loaded onto the card and can be used for purchases globally, wherever Mastercard debit cards are accepted. Additionally, you can use the BitPay Card for online transactions and ATM withdrawals.

Paying Bills with BitPay: A Quick and Easy Process

Paying bills using BitPay without the need for a BitPay Card is simple, secure, and convenient. Just follow these steps:

1. Download the BitPay app: Get started by downloading the BitPay app on your device.

2. Connect your bills: The app allows you to automatically link your bills for seamless payment processing.

3. Select payment preferences: Customize your payment preferences within the app to suit your needs.

4. Make payments: With everything set up, you can easily make payments directly through the BitPay app.

Transferring Funds from BitPay to Your Bank Account

If you're looking to transfer funds from BitPay to your bank account, here's what you need to know:

•Settlement in USD is available via the Automated Clearing House Network (ACH) to banks within the USA.

•After a settlement payment is issued, funds typically appear in your bank account within 2 business days.

•The minimum settlement amount is $20.

•For banks outside of the USA, USD settlements are delivered via wire transfer.

Tracking Crypto Transactions

Crypto transactions, particularly Bitcoin transactions, are tracked and traced through a decentralized public ledger called the blockchain. This ledger serves as an immutable record of all Bitcoin transactions allowing for complete transparency. While transactions can be traced back to their source, the identities of the senders and receivers remain anonymous.

How Does the IRS Regard Cryptocurrency?

The IRS classifies virtual currency, including cryptocurrencies, as property for federal income tax purposes. This means that selling, exchanging, or using virtual currency for transactions, as well as holding it as an investment, can have tax implications and may result in tax liabilities. Essentially, the tax treatment of crypto assets aligns with that of property transactions in most cases.

Understanding Crypto Taxation

The tax implications of cryptocurrency transactions depend on various factors. For instance, if an investor decides to sell or dispose of virtual currency, they must report any resulting capital gains or losses. Additionally, certain activities such as hard forks, airdrops, mining, and staking may be treated as income and subject to taxation.

What is the Current Crypto Tax Rate?

As of 2024, the tax rate on cryptocurrency transactions in the United States is determined by factors such as the duration of asset holding and total income. Short-term capital gains from cryptocurrency held for less than a year are taxed at regular income tax rates, ranging from 10% to 37%. The specific rate depends on the individual's total income and corresponding tax bracket. Conversely, long-term capital gains resulting from cryptocurrency profits held for over a year are subject to lower tax rates, typically between 0% and 20%.

What Forms Are Issued for Reporting Crypto Capital Gains or Losses?

Exchanges typically issue Form 1099-B or Form 1099-MISC to assist traders in reporting their crypto capital gains and losses.

Do I Need to Report My Crypto on Taxes and Which Form Should I Use?

Yes, according to IRS Notice 2014–21, cryptocurrency is considered property by the IRS, and any resulting capital gains or losses must be reported on Schedule D and Form 8949 if necessary.

Understanding Form 1099-DA

Beginning in 2025, Form 1099-DA will be used to report information regarding the sale or disposition of digital assets, including cryptocurrencies, NFTs, and stablecoins. This form will provide details like those found on Form 1099-B for stocks, including:

• Acquisition date of the digital asset

• Cost basis (how much you paid for it)

• Sale or disposition date

• Sales proceeds (how much money you received from selling or swapping it)

Conclusion: Exploring the Exciting World of Crypto

Trading or investing in cryptocurrency can indeed be thrilling, but it's essential to recognize that the information provided here is just the tip of the iceberg. I've touched on key aspects to provide enthusiasts with a starting point for their journey into the crypto space or for those looking to diversify their investment portfolios.

As with any new venture, conducting thorough due diligence is crucial to fully understand the potential benefits and risks involved. There are various avenues you can explore to deepen your knowledge, including:

1. Consulting Certified Crypto Financial Advisors: Seeking insights from professionals in the field can offer invaluable guidance tailored to your specific needs and goals.

2. Educational Platforms: Platforms such as Binance, Coinbase, and Investopedia offer comprehensive educational resources to help you grasp the fundamentals of cryptocurrency trading and investment.

3. Following Influential Figures: Keeping up with influential figures in the crypto space, such as Vitalik Buterin and Dr. Gavin Wood, co-founders of Ethereum, can provide valuable insights and perspectives on industry trends and developments.

4. Joining Crypto Communities: Engaging with like-minded individuals in crypto-centric communities on major social media platforms can foster learning, collaboration, and idea exchange.

5. Enrolling in Specialized Courses: Consider enrolling in dedicated courses, such as those offered by reputable educators like PeteandPete Investors, to gain in-depth knowledge and skills in crypto trading and investment strategies.

Wishing all my fellow crypto enthusiasts the best of luck on your journey into this exciting and dynamic realm!

By Cyd Nzyoka, PhD

Cyd is an independent researcher, writer & HR/Immigration consultant. She’s versatile, passionate about investing, taxes, immigration, teaching at the tertiary level, corporate training and dissertation coaching. She’s involved in writing on multicultural education, social justice and careers among other topics. You may read her works under IGI Global Publications. Cyd is a graduate of Capella University - School of business and technology. Email thoughts and comments to Cydnz@yahoo.com

Disclaimer

This blog is written for educational and informational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. They author may or may or may not have positions in Financial Instruments discussed in this blog. Future results can be dramatically different from the opinions expressed therein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.