Bitcoin was the world’s first decentralized cryptocurrency and is one of the most popular digital currencies in the world today. Since the start of 2019, Bitcoin has recorded tremendous growth and we may just be steering towards another bull market.
Like Litecoin, Ethereum and Ripple, the allure of Bitcoin lies in its volatility. In today’s mile-a-minute climate, cryptocurrency is no longer governed by unpredictability and a lack of regulations.
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The Opportunities for Investing in Bitcoin
Some consider this avenue of investment as the opportunity of a lifetime. Here are a couple of reasons why;
The Long-Term Trend is on an Upswing
Investors predict that this currency has a much lower risk of falling as compared to others. Because it is a global system, it does not get swayed by government policy that causes hyperinflation or collapse of currencies. In fact, in 2019, the rate of Bitcoin grew three times from $4,000 to $14,000 in the first six months.
Bitcoin is Easily Portable
Toting around copious amounts of cash, no matter the currency, is risky. Bitcoin mitigates this risk by letting investors carry around millions of dollars worth of Bitcoin on a single memory card.
The Risk of Inflation is Low
As governments print money, the value of currencies tends to fluctuate. When a currency relinquishes its value, the purchasing power takes a nosedive and people end up paying more for the same products.
Bitcoin averts this scenario. By 2050, it is estimated that 1 Bitcoin will be able to cater to 500 people around the globe.
Bitcoin is Untraceable
No government is able to track the source of your funds as, once Bitcoin passes from buyer to seller, it leaves no digital trail, making it completely untraceable.
Opens the Door for Foreign Investments
Some countries are known to pass restrictions on taking money out of their country, which then discourages buyers from making sizable foreign investments in cash.
But by using cryptocurrency such as Bitcoin, they can still enter a foreign market, due to its digital nature. The use of this currency is especially attractive to those investors who have purchased a lot of the tender, and are now looking to swap it for a more stable, tangible asset.
How Does Bitcoin Impact Income Tax?
Governments are growing wise to the meteoric impact that Bitcoin will have on the economy is the future. The CRA, for example, has already altered the existing tax structure to respond to the growing investment in cryptocurrency.
Accordingly, you will have to declare any income from or expenses made in trade transactions using cryptocurrency on your tax return, even if actual cash was used in the transaction as well.
If you buy, hold, and sell Bitcoin assets during the year, any accruing profits must be claimed as capital gains or income, based on the nuances of the situation. The CRA issued a letter in 2013 that stated that Bitcoin would be treated like a commodity and not legal tender. The U.S. has taken a similar position.
The Growth of the Digital Economy is Reshaping Investments
The potential uses of Bitcoin continue to proliferate with each passing year. Digital transactions are becoming increasingly common as they are well-regulated and aren’t controlled by any one government.
Given the fact that we’re charting unfamiliar territory, there is a significant call for financial services like tax planning to precisely reconcile with reporting codes.
Need Assistance Accounting For Your Cryptocurrency Transactions?
Turn to HSM! Our credentialed and experienced Chartered Professionals Accountants provide financial forecasting and tax planning services, tailored to your unique financial situation. We strive to secure your future and help you acquire the best possible outlook.
