Compared to other types of investment, investing in crypto is considered very risky .
This does not mean that it is to be avoided completely, only that you have to understand that the investment is risky and invest your money accordingly.
Already, cryptos are quite unstable investments: their value can rise and fall very significantly over very short periods of time. It is said to be a volatile investment.
Then, we cannot talk about cryptos without mentioning the fact that a lot of scams are flourishing in this universe, and that you must therefore be very careful when you start investing.
Finally, it is also a new ecosystem, still quite unregulated (which was the basic goal of cryptos, but that is a discussion for another day). Knowing that States are increasingly focusing on the world of cryptos, we do not yet know the regulations to come and their impact on the world of cryptocurrencies.
Is investing in crypto a good idea?
As we saw earlier: it all depends!
It all depends on you, your situation, etc. In summary, if you can afford it.
Two things to consider:
- Integrate cryptos into your investment strategy , diversifying with other investments: stock market, real estate, etc. (and not going 100% crypto).
- Be in a personal and financial situation that allows you to invest in the first place . If you’re in dire financial straits but just lured by the potential for quick wins, it’s probably not a good idea to start now. Invest only the money you can afford to lose.
The taxation of cryptos
In cryptocurrencies as elsewhere, it is impossible not to go through the tax box.
At least it is if you want to invest legally. And since I don’t want any problems with the Public Treasury, that’s the angle I’m going to take for this article.
- The first thing to know is that you don’t pay taxes as long as you don’t sell crypto for more than €305 (i.e. you get money back in fiat currency after having sold crypto) or buy nothing in crypto for more than this amount. It’s a gift .
- The second is that you don’t pay taxes until you convert your cryptos to “fiat” currency (i.e. a currency like euro, dollar, etc.).
And to dig into this point a bit, this is where the stablecoins I was telling you about above become all the more interesting.
Since stablecoins are not a fiat currency, you can exchange your cryptos into stablecoins (in theory more stable than other cryptos) without going through the tax box. You are doing a crypto-to-crypto exchange, so you don’t have to pay anything.
On the other hand, the day you are going to withdraw your cryptos, that’s where everything gets complicated . Very seriously.
Taxes are a very complex environment, crypto too, and here we have a particularly unmanageable fusion of the two.
The tax you will pay in theory is what is called the flat tax . Until then, everything is simple: it’s 30% on your winnings.
The problem is the calculation of your winnings which is extremely complicated. So much that I will not even try to detail it in this article.
Fortunately, there are platforms that can support you when making your declaration (or even do all the calculations for you)
How to invest in cryptocurrency?
Let’s attack the last part, the sinews of war: how to do, concretely, to invest in crypto?
Before we begin, a few reminders:
- Do not invest all your savings in cryptos (and even less on only one or two cryptos). Or at least it’s at your own risk . Experts tend to only recommend placing between 1 and 10% of your wealth in this type of investment, and everything will depend on your specific situation.
- Have a precautionary savings , which is an amount of money set aside to help you get back on your feet (instead of just eating pasta) in case of a financial emergency. This sum is generally best placed in a secure and easily accessible investment.
- Define your strategy in advance : how much you plan to spend each month, on what, etc. Investing a regular amount each month is often a strategy that works better than trying to figure out whether or not it’s time to invest depending on how the markets are doing.
Choose how you want to buy your cryptos
You should know that there are several different ways to buy cryptos. It all depends on how you want to invest.
Overall, there are several ways to invest in crypto:
- From certain online banks (such as Revolut) or specialized platforms
- Since what is called an Exchange
- From online wallets (so-called hot wallets )
- From offline wallets (so-called cold wallets )