Crypto-Investing Plan

Cryptocurrency Investing Checklist

1. Verify Registration: Check if the cryptocurrency you want to invest in is officially registered. While not all cryptocurrencies are registered as securities (for example, Bitcoin is classified as a commodity), many newer cryptocurrencies are registering as securities to establish their legitimacy for initial investors.

2. Understand the Technology: It’s important to have a basic understanding of the technology behind the cryptocurrency. If the technology seems suspicious or unclear, it may be a sign that it’s not a good investment.

3. Check Listings: Find out where the cryptocurrency is listed. Only registered securities can be traded on publicly traded exchanges, but most cryptocurrencies are available on online platforms like Binance and Coinbase. Being listed on multiple reputable exchanges is a positive indicator of the cryptocurrency’s legitimacy. Moreover, trading on well-known exchanges typically ensures higher liquidity, while lesser-known exchanges for infrequently traded currencies might make it harder to sell.

4. Review Market History: Cryptocurrency is known for its volatility, and some coins can be particularly unpredictable. Most exchanges and cryptocurrency websites provide tools to look up the price history of specific cryptocurrencies.

5. Follow Security Best Practices: The greatest strength of cryptocurrency investments is their digital and anonymous nature. However, this can also be a downside if you lose access to your digital or physical wallet, as your investment could be lost forever without the correct keys and passwords. To keep your investment safe, implement best practices such as requiring both a password and a physical hardware wallet key to access the wallet, and ensure that your password and physical key are stored securely.

6. Pay Your Taxes: Just like with traditional investments, selling cryptocurrency for more than its purchase price generates a capital gain. It’s important to note that cryptocurrency bought at different prices can be sold in any order, rather than using a First In, First Out (FIFO) method. Additionally, any cryptocurrency received as payment is taxed as income, and the tax implications can change when it is sold based on whether the currency has appreciated or depreciated.