Bitcoin

Frequently Asked Questions

• How to buy cryptocurrency?

  Once you’ve decided to buy cryptocurrency, you need an account with an exchange, such as Coinbase, that supports that token. The next step is to verify your account and connect it to a payment method like cash, Paypal or even credit cards. You’ll need a crypto wallet, a storage for your keys or crypto passwords, compatible with the token you’re buying. Once you have all those, just place an order.

  Learn More: How Do You Buy Bitcoin?
• How to invest in bitcoin?

  There are many ways to invest in Bitcoin (BTC). You could buy the cryptocurrency on an exchange. You could consider bitcoin mining to earn BTC as a reward. While no Bitcoin ETFs exist you could consider investing indirectly through ETF-like funds such as the Grayscale Bitcoin Trust and the Bitwise 10 Crypto Index Fund. These may require investment minimums as high as $25,000.

  Learn More: How to Invest In Bitcoin?
• How does bitcoin work?

  Bitcoin (BTC) is powered by blockchain technology, which is a ledger that records every transaction. To transact BTC, you need a wallet that has an address. You can send, receive or buy BTC using this address. Every time a Bitcoin transaction occurs, the transaction is verified by miners and recorded. This prevents fraud and double use of the same BTCs.

  Learn More: How Does Bitcoin Work?
• What is bitcoin mining?

  Every bitcoin (BTC) transaction is broadcast on the network and is required to be verified. Computers around the world compete to verify BTC transactions by solving, in the simplest terms, complex mathematical problems. This process is called mining. Miners first to verify a group of transactions are rewarded with BTC. But bitcoin mining requires specialized equipment and consumes a lot of energy.

  Learn More: What is Bitcoin Mining?
• How much is bitcoin worth?

  Just like stocks Bitcoin’s price fluctuates on exchanges based on supply and demand. BTC price is highly volatile and is partly also driven by a limited supply of 21 million BTC. However, there is some debate if BTC, despite high prices, has value. Skeptics believe it doesn’t as it does not meet value requirements that other currencies or assets do, while BTC supporters disagree.

  Learn More: How is Bitcoin Valued?
• How is cryptocurrency taxed?

  For tax purposes, the IRS has ruled that Bitcoin and other virtual currencies be treated as property not currency. That means, not only will you be liable to pay capital gains tax on any profit from the sale of cryptocurrency, but also if you use your crypto to buy goods and services. You will also need to report it as income if you receive crypto in exchange for goods or services. If you meet the threshold, you may also face a 3.8% net investment income tax

  Learn More: How Is Bitcoin Taxed?
• Which cryptocurrency should I invest in?

  There are more than 9,500 cryptocurrencies. Bitcoin is the oldest cryptocurrency and has the highest market cap. While the market cap may give you some idea of the reputation of the crypto, it may see big swings with price volatility. It also tells you nothing of the underlying technology or governance. Start by reading the crypto’s whitepaper to understand how it works better and watch out for executive or regulatory actions.

  Learn More: Can You Compare Cryptocurrencies By Market Cap?
• What can you buy with cryptocurrency?

  Adoption of cryptocurrency as a medium exchange is picking up. A number of retailers such as Overstock and Newegg accept Bitcoin as payment, and so do many stores on Etsy. You could also use payment networks such as PayPal, Flexa. PayPal converts your crypto to U.S. dollars so it may be used at merchants who don’t otherwise accept crypto. Shopping with crypto may not be that hard but remember spending cryptocurrency can trigger a tax liability.

  Learn More: How to Use Bitcoin?