What you should know about the digital currency
You may have heard that businesses such as Microsoft, Overstock.com and Dish Network accept the digital currency bitcoin. Even the sports world jumped in with the NBA’s Sacramento Kings accepting bitcoin for game tickets or purchases made in its team store.
This may have you wondering: What is bitcoin and is it something you should learn more about?
Bitcoin is currently the most popular “crypto currency” or digital money. There are no banks or middle men, which means there are no transaction or credit card fees. Plus, since bitcoin isn’t the official currency of any country, there are no regulations or exchange rates, which makes international payments easy.
Privacy is a key theme of bitcoin. An unknown person using an alias started the currency. The identities of buyers and sellers are never revealed and all bitcoin transactions are private. The cloaked deals appeal to some because they let you buy and sell without disclosing your identity.
You can send bitcoins to others through your computer or an app on a mobile device. Unlike cash, there’s no actual currency. Bitcoins are stored in a digital wallet and can be used to buy things or save, much like a traditional bank account.
You can buy or sell the digital currency on different exchanges, which has prompted some to ask if they should consider investing in bitcoin. Ray Evans, Infinitas founder, says those exploring buying and selling bitcoin should keep the following in mind:
It’s untested. Bitcoin launched in 2009, making it a young currency that hasn’t been through a down market. “At this point, we know very little bit about bitcoin,” Evans said. “It’s new and unproven.”
It may be volatile. The currency doesn’t have a track record of performance during a geo-political or other crisis. “We simply don’t know what it will do.”
It’s anonymous. Evans said the covert nature of bitcoin creates a unique situation. “There’s no way to know who really owns the currency or to verify who you’re doing business with.”It’s unregulated. No middle man or regulating institution like the FDIC may sound appealing when it comes to eliminating fees or red tape but it also can expose investors to risk. “Investors have no recourse if they encounter a bad actor,” Evans said.
It’s not a tax haven. Digital currencies may be anonymous but that doesn’t mean you’re exempt from taxes. The IRS has its eye on bitcoin and other crypto currencies. If you buy low and sell high, you still have to pay capital gains taxes.
To discuss your financial goals and explore investment strategies that may be right for you, let’s talk: [email protected]. This article is intended strictly for educational purposes only and is not a recommendation for or against digital currencies.