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Bitcoin is not the only important cryptocurrency

On Behalf of | Jun 18, 2018 | Tax Law |

If you ask around the office, the cryptocurrency most people will have heard of is Bitcoin. It’s the oldest and is seen as the focal point of the cryptocurrency revolution. It is sort of the gold standard for these coins. It’s also the coin that a lot of people made extreme amounts of money on during the rally in late 2017, when a coin that once sold for pennies reached $20,000 per coin.

However, Bitcoin is definitely not the only option. There are hundreds of different coins on the market. It’s a bit chaotic once you dig into it, and regulations are few and far between, but you can invest in a lot of different options. This is how many traders earn even when Bitcoin is in a decline, as it has been since that $20,000 rally.

A few other cryptocurrencies of note include:

1. Ethereum

This coin is often used by developers, but it has proven its value to any investors. It only started in 2015, years after Bitcoin set the stage, but its market capitalization hit $41.4 billion in 2017, putting it second to only Bitcoin in the entire market.

2. Litecoin

Litecoin started back in 2011, so it’s been around far longer than many of the new coins that got developed around the rally. In many senses, experts consider Bitcoin to be like gold, while Litecoin is like silver. It’s not as valuable, but it has proven to be very effective and it has shown stability — as much as you can get with highly volatile cryptocurrencies — over the years.

3. Dash

While many people consider all cryptocurrencies to offer anonymity, the level you get is not the same. Since it is relatively mainstream, Bitcoin does not offer quite as much secrecy as Dash, which got developed with that role in mind. Some have said that the decentralized mastercode network used to move Dash electronically is nearly untraceable. Developers called this coin “Darkcoin” before a rebrand in 2015.

The risk

These are just three examples, and one key thing to keep in mind with this type of trading is that things change massively, often overnight. Rises and falls happen with incredible frequency. Coins that show great promise and value one day can drop entirely off of the map in just a matter of weeks.

This is not like trading on the stock market. It can offer bigger, faster returns, but it also comes with greater financial risks.

Remember, those who make money trading coins, no matter which coins they choose, must know all of the tax implications of these earnings. Some people have become millionaires virtually overnight, so it is worth looking into a bit further.