Several mistakes are commonly made by new cryptocurrency investors. For starters, it is wise to make a definitive choice between investing vs. active trading. Taxes, transaction fees ( and losses ) quickly add for active cryptocurrency traders. Additionally, the sale of any cryptocurrency that occurs when a coin has been held less than 1 year is taxed much more than a coin that has been held for more than a year. The exact amount of the ” short-term capital gains taxes ” paid upon selling cryptocurrency held less than 1 year is determined by one’s tax bracket.
Additionally, swapping 1 type of coin in exchange for another is considered a ” taxable event “. The maximum income tax write-off due to losses in any given tax season is $3,000.00. If an investor is buying and ” hodling ” quality vs. ” hotep coins ” coins, they will avoid these nuisances altogether.
At some point, some investors may become interested in purchasing a cryptocurrency ” wallet ” that enables them to store the ” keys ” to their coins off of common exchanges such as Coinbase and Kraken. Such wallets come in both hardware and software forms. A cryptocurrency software wallet is akin to a safe that is place on top of the chimney a home. Yes, the assets are locked away and it is difficult to reach them, but cybercriminals know exactly where the assets are located. For this reason, some investors choose to purchase a hardware wallet ( Ex. Trezor or Ledger Nano X ) that enables one to maintain full offline possession of their assets.
Upon purchasing a cryptocurrency wallet, one must plug it into a computer and follow and complete the instructions to ” initialize ” it. If the Ledger Nano X wallet has been purchased, Ledger Live software must subsequently be downloaded onto the computer to act as an interface for getting coin keys onto the hardware device.
During the hard wallet setup, a 4 to 8-digit password PIN must be selected. Subsequent to choosing a PIN, a 24-word recovery phrase will be provided. This phrase must be written down and shared with highly trusted individuals alone. The 24-word recovery phrase used to restore access to coins when a hardware wallet is lost or damaged. Furthermore, three unsuccessful attempts at logging into a hardware wallet will disable the device! If the 24-word recovery phrase is lost, there is no way to recover the coins. This is why Bitcoin worth many millions of dollars has been lost forever by people who’ve either lost their recovery phrase or died without letting anyone know how to locate it. Putting one copy of the recovery phrase into some place ( or in some form ) that cannot be destroyed fire is a good idea.
Fortunately, there are now highly secure Individual Retirement Account ( IRA ) tax shelters that manage cryptocurrency for its clients. Needless to say, a cryptocurrency IRA is probably most suitable for most investors.
RENAISSANCE PHYSICS 