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How To Invest In Cryptocurrencies: The Ultimate Beginners Guide   Cryptocurrencies are seeing a massive surge in popularity. They used to be a niche market, but today everyone wants to learn how they can invest. You can't help but see a news article about Bitcoin prices or stumble upon investment advice via social media.      The growth isn’t even over. The global cryptocurrency market was valued at 332 million US dollars in 2017, has risen to 3.67 billion in 2020, and is projected to reach 394.60 billion by 2028 (Grandviewresearch.com).      What does all this mean? Are you ready to get involved? How can you get started investing in cryptocurrency?      This guide to trading cryptocurrency is designed to help you get a better understanding about cryptocurrency and how they work. Read on to find out how it works, what your options are, and the best and safest way to invest in digital currency.      While the decision to invest in cryptocurrency is ultimately up to you, it is our hope that you'll walk away from this guide feeling more educated, empowered, and confident that you have everything you need to start investing.      Contents      What is Cryptocurrency and how can you invest in it? Cryptocurrency: How to Invest      What cryptocurrency should you invest in      How to Buy Cryptocurrency From A (CeFi), Centralized Exchange      How to Buy Cryptocurrency From A (DeFi] Decentralized Exchange      Bitcoin buying without owning BTC      Is There A Good Time To Buy?      How to Store Cryptocurrencies      Hot Wallets vs. cold Wallets      Hardware wallets      Paper wallets for safety      Do I Need to Do Crypto taxes?  CRYPTO     Conclusion: How to Invest Cryptocurrency      What is Cryptocurrency?      Cryptocurrency refers to digital assets that are verified and maintained by a decentralized blockchain system using cryptocurrency. This is in contrast to centralized authorities like banks or Visa credit cards. Bitcoin is the most popular cryptocurrency today as a currency that functions as a store of value. According to a 2019 study, Bitcoin is currently held by approximately 100 million people.      Unlike traditional money, or 'fiat', which is printed and backed by a centralized government, cryptocurrency has no physical form, and exists digitally on a blockchain as tokens.      While crypto is not yet widely accepted, it is becoming a real-world currency by some early adopters. Mark Cuban, owner of NBA franchise The Dallas Mavericks announced that the Mavs now accept the cryptocurrency Dogecoin for online tickets and merchandise purchases. PayPal, a centralized payment provider, now accepts Bitcoin as well as other cryptocurrencies.      Just like stocks or bonds, cryptocurrencies can change in value depending on the demand. This is why many people have taken an interest in investing in cryptocurrencies and speculating.      What is the difference between cryptocurrencies and fiat money?      Fiat money is money that is not issued by the government. This means that the central authority is responsible for regulating its value, interest rates and supply (how much it is in circulation). Many view this level of government involvement with the mechanics of free markets as manipulation and an archaic (and futile!) attempt at managing a complex economic system. A noble intention at best, a catalyst of hyperinflation that makes wealth building very difficult for the average person, at worst.      Cryptocurrencies on the other hand are decentralized. All transactions are done peer to peer or through smart contracts, and there is no authority to oversee them. Many people consider this a significant advantage over traditional currency, as they have complete control of their assets.      When a new cryptocurrency transaction occurs, it gets added to a digital ledger of all other transactions on a decentralized network of computers called the blockchain. Computers or "nodes" of blockchain can have varying degrees centralization and decentralization. They can be spread across the globe. These nodes verify that a transaction is added to the blockchain by comparing it to each other's records.      The blockchain is extremely secure and almost impossible to hack. To fake a transaction someone would need 51% of the nodes within a network to do so. This would take a lot of time and be expensive.      Cryptocurrency Investments      Before we go into how to invest crypto, it's important that you understand that there are both good and bad reasons. Remember that for every person who made an overnight fortune trading Bitcoin, there is someone who lost their entire life's savings, so if you're not willing or able to tolerate high-risk and extremely volatile investments with potential for high rewards and losses, then cryptocurrency investing may not be for you.      If you're curious about how cryptocurrencies could change the way we manage our finances forever, and willing to learn, then read on.      There are many good reasons to invest cryptocurrency      You believe cryptocurrencies are the future. They will likely replace traditional fiat currency. You want to be prepared and educated in order to make this happen. You support the social vision behind cryptocurrencies - that currency should be decentralized and under full control of the people who use it. You are able to understand and appreciate blockchain technology's workings - you value transactions that are peer-to-peer and their security and confidentiality. Is Cryptocurrency a Good Investment?      The cryptocurrency markets are more volatile than the stock and bond markets. Because there is less liquidity and more speculation than traditional financial market, any cryptocurrency's value can fluctuate up or down by 30% in a single day. Crypto markets can be traded 24/7, 365 Days a Year. The NASDAQ and LSE have no weekend or evening hours.      You might feel that cryptocurrencies offer a great opportunity for quick profit if you have been hearing about them a lot. If you don't take the time to learn about the market and technology, you could lose money.      Let's start with Bitcoin, the most prominent and dominant cryptoasset.      Bitcoin's early investors have made millions of dollars in profit. Bitcoin's value jumped from $7,000 USD in April 2020, to over $60,000 USD by April 2021 in a year. Now imagine what kinds of profits went into the pockets of people who bought Bitcoin back in 2013, when it was a mere $100 USD.      Though that sounds very exciting, it certainly is not the whole picture. Take a look at this graph which shows Bitcoin's price fluctuations between Oct 2013 and May 2021. It's not a straight upward climb.      Bitcoin's value dropped from $18,000 in December 2017 and $3,000 in December 2018. You can also see a quicker drop if you were among those who were excited by the Bitcoin's growth in December 2017 to $3,000 in December 2018.      The point is this: cryptocurrency prices are extremely volatile and hard to predict in a short term. Just one tweet from Elon Musk or a big company announcement can send the currency's price soaring or plummeting in just hours.      This is why you should only ever take on as much risk as you can afford. Wence Casares CEO of Xapo sums it all in an AMA at bitcoin.com      "I always tell them [my families] that the worst thing they can do right now would be to have a lot of bitcoins that they can't afford to lose, and the best thing they could possibly do would be not to own any."      It's essential to learn about cryptocurrency before investing. Or, as they say, DYOR – do your own research      Which cryptocurrency should you invest in?      Blockgeeks is not a financial advisor. Second, Blockgeeks never asks anyone to tell you what to do with your money. Google is the exception to this rule. Be educated, understand the risks, and consider all possible outcomes before you make any investment.      Bitcoin is still the undisputed king among cryptocurrency - it has been around for the longest time and has the largest market capitalization at over 674 billion dollars (as of May 2002). Market capitalization is the sum of all tokens, or the price for each token multiplied times the number of tokens.      There are many cryptocurrencies that you can choose from such as Ethereum, Cardano or Litecoin. They all differ in price, availability, demand, transaction speed and fees, and the technology that supports them.      CoinMarketCap lists more than 5,000 options in decreasing market capitalization order. Here are the top 10 options and their performance up to May 2021.      It doesn't matter what the price of a given cryptocurrency is, you can always buy a fraction of a token. For example, if 1 bitcoin costs $35,000 USD, you could always buy 0.0001 bitcoin for the equivalent price of $350 USD.    CoinMarketCap is a great place to start your research on tokens you want to invest in. It's actually where the real work begins.      Continue reading to learn how to properly invest in cryptocurrency, how to evaluate whether cryptocurrency is worth it, and how to avoid falling for fraudulent or risky situations.      1. Read the Project's Whitepaper      After you've found the cryptocurrency you like, read the whitepaper.      A whitepaper is a report or guide that provides authoritative information to readers about complex issues and outlines the viewpoints of the issuing agency. It is meant to help readers understand an issue, solve a problem, or make a decision." (Wikipedia)      Two incredible benefits can be derived from the whitepaper      Potential investors will learn everything they need to know about cryptocurrency and the potential value it can bring into the ecosystem. 1. A poorly written whitepaper can often be a sign that the project might not be worth investing in. If the team behind the cryptocurrency cannot adequately explain the true utility and benefits of their token, it is probably not worth supporting.      2. Think About the Value that the Project is Bringing In      You can check to see if the project is adding any useful utility to the ecosystem. The perfect example of this is Ethereum. There is a reason why it took off so fast - for the first time, developers around the world had a platform that they could use to build their own dapps - or decentralized applications - on a blockchain.      Keep in mind that the crypto community is desperate to solve privacy, scaleability, and interoperability. It is a good idea to invest in projects that address these issues.      Players trying to solve these problems and integrate them into their platform, or "Layer 1," network, are:      Matic Binance Smart chain Fantom Polkadot Solana      3. Evaluate the Project's Tokenomics      How can you ensure that you get high quality tokens?      William Mougayar provides a great framework to evaluate a token, based on three principles.      Role Purpose features      Each token role has a specific purpose as shown below:      Right: The token holder receives certain rights within an ecosystem, such as voting rights. The token facilitates value exchange between buyers and sellers within the ecosystem. Toll: The token acts like a tollgate to allow holders to access certain features of the system. Function: The token can be used to enhance the user's experience in the environment. The token can be used to store value and conduct transactions within and outside the ecosystem. Earnings are a fair distribution of profits and other financial benefits among investors.      The following table shows examples of criteria that can be used to evaluate a token.      So, how does this all help with evaluating token utility?      If you want to maximize the amount of utility that a token provides, then it needs to check off more than one of these roles. The more roles it serves, the more utility and value your token brings into the ecosystem. If the token's role is unclear or it doesn't serve at most two roles, it will have little utility. Your best option would be to look for another option.      Now, why shouldn't you take a chance on tokens with no utility?      To answer that question, it is necessary to understand the concept called token velocity. Token velocity indicates how much people value a particular token. People who keep a token have low velocity. On the other hand, if people quickly sell the token for another currency or fiat money, then that token has high velocity.      It would look something like this if you tried to define token velocity strictly mathematically:      Token Velocity = Total Transaction Volume / Average Net Value      If we were to reverse the formula, then:      These two conclusions are now clear:      Higher token velocity means lower average network value - Higher transactional volume means higher token velocity      You should invest in projects with lots of utility tokens. This will give you a reason to keep them. This decreases the token's velocity which in turn increases the average network worth.      4. Watch out for obvious signs that you are being swindled      Good coins have a transparent technical vision, an active development team, and a lively, enthusiastic community. Bad coins are not transparent, promote fuzzy technical advantages without explaining how to reach them, and have a community that is mostly focused on getting rich quickly. Perhaps the worst kind of cryptocurrencies are MLM coins like the now infamous scam Bitconnect.      We'll talk more about Bitconnect later. These are the most obvious signs of fraud.      1. The Team      It's obvious that the credibility of the team is directly related to the success or failure of a project. Let's say you're thinking of investing in a company and want to know that it is in good hands.      Uniswap is one of the most successful new projects in the current 2020-2021 market cycle. Uniswap, which was created in 2018 by Hayden Adams (ex-Siemens engineer), saw remarkable success in 2020-2021. It was generating fees of around $2-3 million USD per day for liquidity providers that create a market to buy and sell on the platform in March 2021.      Compare that to this team.      Yes...your eyes are not deceiving you, that's Ryan Gosling's photo on the team page.      It is unlikely that bad investment advice will be so easy to identify. However, there are steps that you can take to ensure the credibility of the project's team.      First, search Google to find the names of the team members. Most people will have a LinkedIn page. Learn as much about each team member as possible and ask the following questions.      Have they been involved with any successful ICO ventures before? Are they involved in a reputable business? Have they been recommended or endorsed by credible people?      Next, search Google to find the photos of your team members. This will allow to identify if you're being "catfished". You may find out that the photo shows another person, a celebrity, or stock photography model. You might also find the same photo in a number of other projects - another sign of a scam.      1. Pyramid Scheme Resemblance      Wikipedia explains that a pyramid scheme is an arrangement in which members are promised payments or services to enroll others in the scheme. This is not a scheme for supplying investment or selling products or other services. As recruitment becomes more difficult, most members lose their ability to make a profit. Pyramids schemes are often illegal and unsustainable.      Scammers are looking for ICOs that promise "guaranteed profits" on their investments. Any crypto investor worth their salt will tell you that there are no guarantees in the crypto currency world.      Bitconnect is one of the most outrageous examples of this. Let's take a look at their website and promises.      Don't take any bounties if you see something like this on a website. Simple as that.      You don't want to end up with tokens like these:      1. Inactive Code Repository      An active GitHub repo is a sign of serious development. Here's an example of a active GitHub repository: With 1,014 commits, it is clear that their developers are giving everything they have to the project.      How to Buy cryptocurrencies on a Centralized Exchange (CeFi).      Find a centralized exchange that will accept your local fiat currency (ie. US: Coinbase and Kraken, CA, Newton, Bitbuy. Create an account and upload your proof. Wait for verification according to KYC/AML regulations. Send fiat from the bank via direct deposit, SWIFT money transfer, or credit card to the exchange. Buy crypto (availability varies depending on exchange). The exchange is one of the most important functions in the crypto ecosystem. It is basically a portal between crypto and fiat, the "on-ramp", if you will. Centralized exchanges help you buy Cryptocurrencies in exchange for fiat money (US or Canadian dollars, British pounds, etc). Coinbase is an example of such an exchange. Coinbase's easy-to-use app allows you to convert your fiat into crypto.      If you are wondering why you have go through the lengthy and difficult process of signingups and verifications to purchase cryptocurrency, the answer lies with the various Know Your Customer and Anti-Money Laundering law that centralized exchanges are legally obliged to comply. Some exchanges avoid this process by simply not allowing you to deposit your fiat dollars into the exchange, and limit transactions to be between crypto-to-crypto, as opposed to the fiat-to-crypto that requires AML laws to be observed by the exchange.    How to Buy cryptocurrencies on a (DeFi-Decentralized Exchange)      First, create an account on a central exchange (see above). Next, create a hot wallet (ie. Metamask, TrustWallet, can be added to your browser extension (Chrome, Firefox). Be sure to physically write down the secret passphrase on paper, and keep it secure! Transfer crypto from your centralized exchange wallet to your hot wallet. Evaluate and choose the blockchain ecosystem you prefer (ie. Find a decentralized crypto exchange (DEX), which has the liquidity and assets you need in the ecosystem you are interested in. There are many factors that will influence your choice of which exchange to use. What is your risk tolerance? What are your investment goals? What is the investment or trading strategy you use? How important is security, privacy, or decentralization to you?      There are a lot of variables and trade-offs to consider, and no one-size fits all answer. One thing is certain: crypto investing can be risky. Do your research and make sure you have strong conviction.      If you want to learn more about how to safely invest in CeFi and DeFi exchanges, our Crypto Investment School course has a comprehensive curriculum taught by crypto investors who've got real-world experience.      Bitcoins without owning BTC: Buying Bitcoin      While some years ago it was a very challenging process to buy cryptocurrencies, today there are a range of options, some easier, some more difficult - each with different degrees of exposure to Bitcoin as an asset.      Although buying Bitcoin on any CeFi exchanges mentioned above is the best way to buy it, there are other ways to be exposed to cryptoassets that have less direct exposure.      Today, you can get indirect exposure to Bitcoin by investing in publicly traded cryptoassets. Greyscale Investments is a large digital currency asset management company with approximately $46B under management (AUM).      The first crypto ETFs on the Canadian markets are starting to be available with Galaxy Bitcoin and Ethereum ETFs as well as Purpose Bitcoin and Ethereum ETFs.      Shares of stock can be purchased via Robinhood or a local stock broker.      You can also choose to invest in publicly traded Bitcoin mining companies such as Riot or Hive. These companies earn profit by mining and issuing Bitcoin to the Blockchain.      Is There A Good Time To Buy?      There is no general rule when to buy cryptocurrencies. It is usually not a good idea buy cryptocurrencies at the peak of a bubble. EXPLORER Also, it is often not a good idea buy them when they are falling. Never catch a falling knife, as the trader's wisdom says. The best time might be when the price is stable at a relatively low level.      The art and science of cryptocurrency trading is a huge topic. It is hard to know when a crypto is going through a bubble and when it is at its lowest point. It is difficult to answer the present question in retrospect, but it is easy to say what is happening in the past. Sometimes a coin begins to rise after it crosses a key line in historical resistance. Many believe this to be the peak of an inflated coin.      For example, many people did not buy Bitcoin at $1,000 or Ether at $100, because it seemed to be overpriced. These prices have remained low for years, but they now seem to be an amazing bargain that will never again be on the market.      This is not financial advice. However, these are some guidelines to help you make the right decision about when to invest.      Don't confuse crypto bubbles and traditional bubbles in traditional financial services. Daily volatility can easily be caused by a 10% price rise or fall in crypto. Cryptocurrencies Although 100 percent can be a bubble it is often just the beginning. 1,000 percent is a common bubble, but it is unlikely that it will burst. Do not buy-in just because there was a dip. You might find another one, so take your time to see the changes. Don't buy in to the fear of the price exploding tomorrow. Make sure you are informed and only buy in if you feel confident in your entry point. - Avoid reactive selling or 'paper fingers'. Selling too early can damage your plan and cause you to lose your ROI. Hold. Diamond Hands. The monetary revolution has just begun.      Alright, so you bought your cryptocurrencies, where exactly should you store them?      Today's centralized exchanges offer greater security, reliability, and insurance than they did a few years ago. Most retail investors are comfortable trusting a centralized crypto currency trading platform like Binance and Coinbase with custody of their holdings. This is the easiest and quickest option since crypto adoption is just beginning.      There are many options for crypto wallets available to suit your needs. If you want to learn even more about what is available see our in depth Cryptocurrency Wallet Guide: A Step-By-Step Tutorial.      Hot Wallets vs. cold Wallets      Let's use a real example to show you the difference. Hot storage is similar to the wallets you keep in your pocket. Cold storage is more like a savings account. This distinction is important to keep in mind as you move on. Basically, if you want to use your digital currency frequently then you must use hot storage. On the other hand, if you want to store your money for a long time then you must use cold storage.      Hot Wallet/Storage      Hot storage, in simple terms, is when you keep your cryptocurrency in a device that is directly connected to the internet. This connection is what makes a gadget "hot".      You should think of exchange wallets, desktop clients, and mobile wallets (any wallet that exists on a device that will ever connect to the internet) as a hot wallet. It's easy and convenient to access funds in a hot wallet. If you live somewhere that allows micropayments, you can use one for your day-to-day expenses. It can be thought of as fiat (government issued) currency. While you might carry a small amount of your wealth around in your wallet, the bulk should be kept safe. Your hot wallet should behave in the same way as a real-world wallet. You can carry small amounts of cash to make it easy to access. That's all.      Although hot wallets are very easy to use, there is one major drawback. They are easily hackable. The entire crypto-space has been experiencing a lot more value in recent years. And crime is never far away from places where there's value. Recent ransomware attacks and previous compromises of large exchanges should be sufficient beacons to newcomers.      Although you won't be storing much value in your hot wallet, it is important that you follow the backup steps in the restoration section of the wallet to avoid any human error. You should be able enough to restore any wallet with your private key intact and your seed phrase intact.      Hot Storage's Pros      It is easy to get funds. A wide number of options, and support for different devices. Simple and user-friendly interfaces make sending and receiving messages easy.      Cons of Hot Storing      Cybercrime has exposed you. Ransomware, sophisticated hackers and other malicious actors are constant threats. Damaging the device could destroy the wallet. Without carefully backing up private keys, and seed words you could permanently lose your cryptocurrency investment. You might still lose/damage/have stolen restoration details.      Let's now explore the different types of hot wallets you have.      Online Wallets aka Cloud Wallet Mobile Wallets Desktop Wallets Multisig Wallets      Cold Wallets/Storage      When you keep your digital currency in a device that is completely offline it's called cold storage. Cold wallets are the best form of storage. These wallets are best for long-term holders who don't need access to their coins for many months or years.      These aren't without risks, but if you follow the instructions and take every precaution, they can be greatly reduced. Due to the attention cryptocurrency has received over the past few years, it has unfortunately attracted the attention of attackers. Cold storage is a safer option than traditional methods of storing your money.      CoinBase, a San Francisco bitcoin wallet and exchange service, keeps 97% of its coins in paper and physical wallets. What are hardware and what are paper wallets, you ask? It is all here. Let's first look at the pros & cons of cold storage.      Pros and Cons of Cold Storage      This is a great spot to keep large amounts of currency for a prolonged period of time. It is completely offline, so it acts as a safety net from hackers and others with malicious intent.      Cons of Cold Storage      It is still susceptible for theft, external damage and general human carelessness. It is not suitable for daily transactions. It can be intimidating to set it all up.    Let's now look at the pros and cons of each.      Hardware wallets      Hardware wallets are physical devices where you can store your cryptocurrency. There are many types of hardware wallets, but the most popular is the USB stick type, typified by Nano Ledger series. Although many swear by them, hardware wallets are still prone to compromise. First, you can trust that the company that made your wallet has not logged all private keys and plans to raid future wallets. This applies to wallets purchased directly from the company, but it is especially true for second-hand hardware wallets. Pre-owned hardware wallets should not be used.      Hardware wallets can be repaired even though they can be lost or damaged. It is just as important to backup your hardware wallet online as it is your online hot accounts. You should keep your restoration details in a safe location that you only and anyone you intend to give the money to, can access. Remember that restoration details are available to anyone who has access to your wallet. Be careful about who you share your coins with. It is vital that you transfer all your coins to a different wallet in the event of any unfortunate events (spouse, for example).      These are some hardware wallets which you can use.      - Ledger Nano X Trezor Keepkey.      Paper wallets to protect your privacy      Without a doubt, the safest way to store any cryptocurrency is by using a paper wallet. You can easily set one up for free by following the steps below. This allows you to be the master of your investments. If you take care of it, no one can access your private keys. Of course, this means that keeping a record of them is even more important. Losing private keys means you'll forfeit the entire contents of your paper wallet (but then again, that's true for every wallet out there.)      What Is a Paper Wallet?      Paper wallets can be used to store cryptocurrency offline. It involves printing your public key and private keys on a piece if paper. Then you store the paper in a secure location. You can scan the QR codes for all future transactions and print the keys. The reason why it is so safe is that it gives complete control to you, the user. You don’t have to worry too much about the hardware’s safety or about malware or hackers. You just need to take care of a piece of paper.      Do You Need a Paper Wallet to Keep Your Money Safe?      This question will depend on your situation. You may not be able to trade cryptocurrency for a few dollars this summer if you don't plan on doing so. A paper wallet is a safer option if you are looking to keep your coins safe for the long-term. Here are some paper wallets that can be used:      For Bitcoin, Litecoin, Dogecoin etc. Wallet Generator can be used. My Ethereum Wallet can be used to hold ERC20 and Ethereum tokens.      Do I Need to Do Crypto taxes?      Disclaimer: We are no tax bureau nor tax consultants. If you have issues with taxes, and if large sums are at stake, you better ask your local tax consultant.      Right now there are only a few tax consultants who know how to deal with cryptocurrencies. But it can be safely assumed that the number is growing quickly and that cryptocurrencies will soon be a standard issue for tax experts like securities, shares, ETFs and real estates are.      All we can provide here is an overview of the typical issues with cryptocurrencies and taxes.      No Free Lunch      Crypto is not an exception to the rule. If you earn money by investing in cryptocurrencies, you likely have to pay taxes.      Investment tax returns for cryptocurrency are dependent on your local and national tax regulations.      Nearly every country of the world exempts cryptocurrencies from VAT. Selling Bitcoin isn't like selling any other financial product. You don’t need to pay VAT. Although there were some tax authorities in Australia, Estonia, Germany and Sweden that wanted to charge VAT on crypto sales, the European Court overturned this important decision.      Another good news is that you don't have to pay any taxes in certain jurisdictions. Amazingly Germany, a country usually known for very high tax rates, has become a tax haven for cryptocurrencies. Like the USA and many other countries, Germany considers Bitcoin not a financial product, but a property. This means that if you earn money by trading it, you don't pay a flat tax for financial income - which is 25 percent, for example for bank account interest - but you have to tax the profit of buying and selling cryptocurrencies like income.      It's more as you sold your house than a security.      You bought 10 Bitcoins for 1,000 Euro and sold them for 2,000? Your taxable income grew by 10,000 Euro.      One bitcoin was purchased for 100 Euro. You ordered a 10-Euro pizza when the price was 1,000 Euro. Your income increased by 9 Euro. The tax rate for this income is usually higher than the one for financial gains.      However, there is a loophole. If your coins are held for more than one year, then you don't have to pay taxes on the sale. This rule was implemented to disincentivize day trade of other properties and to incentivize holders. For cryptocurrencies it made Germany, and also the Netherlands, which apply the same rules, to tax havens. Other countries may have similar rules. In doubt, your tax advisor can help you out.      One problem with the one-year rule is that you must prove that you have the crypto for the required time. Exchanges will usually be able to provide you with a print of your trade history. The public blockchain can be used as proof of storage. In most cryptocurrencies, it is transparent when coins are received and spent by a particular address. Not all cryptocurrencies are transparent. For example, Monero uses Ring Signatures and Confidential Transactions, which are great tools to maintain anonymity. The downside is that it's difficult to prove that you've held coins for longer than one year. You might consider this when choosing coins to add to your portfolio.      Conclusion: How to Invest in Cryptocurrency      Taxing Bitcoin can be done if you use a reliable exchange and keep track your trades. However, it is not easy. You must calculate every single profit, both from cryptocurrency trading and from using Bitcoins as payment for goods.      This is just the beginning. Things become really a complicated nightmare if it comes to Altcoins. An Altcoin is the same thing as Bitcoin to tax authorities. It is a property, and not a financial product in most countries. If you purchase it using Bitcoin and then sell it to Bitcoin, you will have to tax the difference in Bitcoin, Dollar, or your national currency. This means you need to not only keep track of all Altcoin trades, but also take into consideration the Bitcoin price when buying or selling.      This makes things very complicated. A bad trade can result in less Bitcoin being returned than you invested. However, you are still liable for taxes if the price of Bitcoin has soared between your trades. So, you lose money in cryptocurrency trading and have to pay taxes.      At this moment you should accept the fact that cryptocurrencies are something new and that you are no expert in dealing with your financial authorities. Go for a tax consultant, educate her or him about cryptocurrencies and look forward to talking with confused financial authority officials. 

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