Investing in cryptocurrency is a long journey. There are enough ups, downs, and detours to keep anyone on their toes. For beginners, there’s a wealth of knowledge from veteran crypto investors. Take advantage of the wisdom of those who have taken this journey before and come out ahead.
Don’t Panic
This isn’t just a rule for crypto; it’s a rule that applies to every investment. When the market crashes, don’t panic and don’t race to sell. The problem with most investments is that human nature is fickle. Experts tell us to “buy low, sell high,” but when we see that price chart plummet, we want out, fast.
The number one mistake you can make as an investor is to sell after a market downturn. It’s the best way to make sure you sell at a loss.
It can be hard to keep your cool during a market crash, but if you believe in the asset you’re investing in, you should believe in its comeback.
Wait it out and wait for the recovery. If you can’t afford to watch prices continue to fall, you can’t afford to make the investment in the first place.
Patience is essential when you’re making long-term investments.
You Have to Pay Taxes
Yes, you have to pay taxes when you invest in cryptocurrency. All cryptocurrencies are considered commodities from a tax perspective, which means two things:
- You do not have to pay a sales tax when you purchase them,
- But you do have to pay capital gains or taxes on business income when you sell them.
You even have to pay taxes when you use cryptocurrency to buy goods or services. It’s considered a disposition of the asset, and you will have to pay taxes based on the Fair Market Value of the cryptocurrency at the time of the transaction.
There can be serious consequences if you don’t pay taxes on your cryptocurrency transactions, including auditing or even prosecution. If you’re going to invest in crypto, get help with tax planning. You can find out more about how to tax plan for cryptocurrency at cryptotaxlawyer.com.
Include Bitcoin and Ethereum in Your Portfolio
As tempting as it is to go for massive growth and buy altcoins that haven’t popped yet, there’s a reason altcoin price is what they are. Bitcoin and Ethereum have achieved a level of mainstream acceptance. They are what the rest of the world thinks of when it thinks of cryptocurrency.
Bitcoin is the most commonly purchased, held, and traded cryptocurrency on the market. It has a massive market capitalization compared to any other coin, and it has the strongest market fundamentals. The dominance of Bitcoin means that, other market influences aside, altcoins tend to follow its price trends anyway. If you’re looking for exposure to the broader cryptocurrency market, Bitcoin and Ethereum are essentials.
Bitcoin is here to stay, while many altcoins on the market are experiments. You’re rolling a roulette wheel with altcoins, and while one may hit, it may just as easily fade away.
