Today we’re going to talk about Cryptocurrencand I’ll try to cut through some of the hype. If your new to crypto, check out Investopedia’s cryptocurrency page. https://www.investopedia.com/cryptocurrency-4427699 

Cryptocurrencies are systems that allow for secure payments online directly between individuals without  middlemen. Cryptocurrencies use virtual tokens which are created, called mining, on a network of dispersed computers that randomly record blocks of cryptocurrency transactions, called blockchain technology. Bitcoin and Ethereum are two well known cryptocurrencies.

You can make money directly by mining cryptocurrency, but that takes massive computing power. Or by buying a cryptocurrency, and then selling (hopefully) at a profit. The value is based solely on supply and demand and prices have had huge price swings up and down. Blockchain technology is often cited as the real prize. But you can’t buy the blockchain any more than you can buy the internet. 

There more ways to play. BlockFi https://www.blockfitrust.com/ is offering an account that pays interest on cryptocurrency deposited with them, as well as cryptocurrency trusts. There are Cryptocurrency exchange-traded funds (ETFs) and Blockchain ETFs that own stocks in companies that have business operations in blockchain technology.  

But ingenuity and innovation are still far out pacing regulation and disclosure. Finding information on trading costs is tough. After digging through Coinbase’s website I found “it depends”. They disclose trading costs just before you place a trade. On Venmo, I had to go to the literal fine print . “When you buy or sell cryptocurrency, we will disclose an exchange rate and any fees you will be charged for that transaction. The exchange rate includes a spread that Venmo earns on each purchase and sale.” https://venmo.com/about/crypto/   Grayscale which offers a fund only open to accredited investors clearly states it charges a 2.5% management fee. https://grayscale.com/wp-content/uploads/sites/3/2021/08/dlc-fund-fact-sheet-august-2021.pdf  

Price manipulation is another concern. Interestingly, Coinbase addresses this in its crypto slang guide, rather than an easy to find disclosure section. https://www.coinbase.com/learn/tip-and-tutorials/crypto-slang-guide

A pump and dump is a coordinated effort to artificially inflate the price of an asset and cash out before it tumbles back to down. Think Gamestock. The biggest holders of crypto, known as whales, have the potential to move markets with their trades. The top 100 Bitcoin addresses out  800,000 plus held more than 20 percent of all BTC according to bitinfocharts.com. 

Lastly, there’s taxes and recordkeeping. You need to keep detailed crypto records to to file your income tax returns, or again pay someone else to do the record keeping for you. The cryptotrader.tax website has a good blog that covers a lot of the (many) tax rules you need to consider. https://cryptotrader.tax/blog/the-traders-guide-to-cryptocurrency-taxes

 Keep learning and if you want to start playing in crypto, don’t go all in.  I’m not recommending it at all just yet. But if you try it,  don’t invest any more than you are willing to completely lose