I invest in crypto. How can I keep track of all this?

Q. With Bitcoin’s lower price, I finally started investing in it and other cryptos. I’ve heard that tracking transactions can be a nightmare. Is there a way to make this easier?

– Investor

A. You are correct that cryptocurrency traders have struggled to track transactions, depending on the exchange they use.

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But things get easier. Just be proactive.

Let’s start by commenting it all works.

Bitcoin is the most popular form of cryptocurrency that uses a large chain of interconnected computers to store and protect digital assets, Lisa McKnight, Certified Financial Planner at Peapack Private Wealth Management in New Providence.

“Investing in Bitcoin may seem complicated, but all you really need to start investing are personal identification documents, bank account details and a secure internet connection,” she said.

To start investing, it’s best to join a Bitcoin exchange like Coinbase or Crypto.com to make your purchase, McKnight said.

“You also get a bitcoin wallet. This is where your purchased Bitcoin is stored,” she said. “It is imperative that you practice proper storage and security to ensure that your investment is not hacked.”

You’ll also need to track your cryptocurrency across all wallets, exchanges and platforms in real time, McKnight said. For this, you can use a crypto wallet tracker app, which allows you to track the total amount and value of your cryptocurrencies, track current and historical transactions and provide live cryptocurrency prices, she said. Many apps also have charting and value prediction tools to help users make timely decisions. Most apps are free, but some with more advanced features have annual fees, she said.

Another factor to consider is the tracking of trades for tax purposes.

“All cryptocurrencies are treated as property for tax purposes. Therefore, you may incur capital gains and losses when you buy, sell, trade or risk your crypto,” McKnight said. “In addition to buying, selling and trading, if you earn cryptocurrency, whether through employment, mining, staking, or interest from lending activities, you are liable for income taxes on the US dollar value of your crypto income.

She said calculating your capital gains and losses from your crypto trading activity requires detailed records to track your cost basis, fair market value, and gain or loss each time you risk a crypto. Without this information, you will not be able to calculate your realized income from your trading activity and you will not be able to declare it on your taxes.

McKnight said that if you’re not qualified to keep these detailed books and records, you’ll need to use crypto tax software so you can accurately report your activities on IRS Form 8949 at tax time.

“As you know, Bitcoin is very volatile and tends to have large and rapid swings in value, which offers the opportunity for large returns, but also enormous risk,” she said. “It is important that you learn how to invest responsibly in Bitcoin before making any decisions. Be sure to diversify your investment portfolio to protect yourself from market volatility.

Send your questions to Ask@NJMoneyHelp.com.

Karin Price Mueller writes Bamboo column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. To find NJMoneyHelp on Facebook. sign up NJMoneyHelp.comit is weekly e-newsletter.

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