Cryptocurrencies are all the rage lately, and an ever-increasing number of investors are testing their luck by trading digital currencies such as Bitcoin. If you are interested in trading cryptocurrency, you likely have a decent understanding of its fundamentals.
However, it is always good to know about virtual currencies extending beyond their bare basics. The following are some surprising facts that you might not be familiar with regarding cryptocurrency trading.
Crypto Transactions are Difficult to Trace, But Not Impossible
One of the most significant aspects of crypto trading is that it is an anonymous form of payment, whereby you hold a crypto address but your identity, or real name, remains hidden. With that said, it is essential to know that crypto transactions are not entirely anonymous, rather pseudo-anonymous.
It is a common misconception that crypto transactions can not be tracked and are untraceable. But the truth is, each transaction you make gets recorded in a permanently fixed ledger, known as a blockchain, with records open to public view. While it takes some effort, crypto wallet addresses can be tracked and linked to the real identities behind them.
The plus side is that the relevant enforcement agencies can hunt down cybercriminals and bad actors who use crypto for illegal activities, such as money laundering.
You Can Automate Crypto Trading
A well-known fact about cryptocurrencies is that they are very volatile, and prices fluctuate dramatically within a few minutes. In most cases, investors can not monitor these market fluctuations round the clock and or react quickly enough to these changes in the price to lock in the best trades. That is when automated cryptocurrency trading comes into the picture. By gathering market data, interpreting it, and calculating the potential risk, crypto trading bots make for a reliable crypto trading experience. They execute transactions on behalf of their human investors, significantly lowering the risk of going into a loss and helping investors conduct profitable trades.
It is Taxable
While cryptocurrencies may be unregulated, that does not mean you can get a free ride on all the profits you pocket. Depending upon the country, you may owe taxes to the government if you are a taxpayer and trade cryptocurrencies.
The IRS, or Internal Revenue Service, is the federal institution responsible for collecting taxes in the United States. It defines crypto as property, not currency. That means that any profit from them is taxable. So if you buy $2,000 of crypto and sell it for $3000, you must report and pay taxes on the gain of $1000.
Accordingly, it is your responsibility as a US citizen to report all capital gains from crypto trading and pay tax on it. Failure to adhere to tax rules by the government may result in IRS levying interest or other costly penalties.
Private Keys Cannot Be Recovered
As you may know, you need a private key to access your digital wallet, which holds your funds when trading cryptocurrencies. But what many new investors are unaware of is that if they lose their private key, there is no way to recover it and access your money.
That ultimately means that you will never be able to get your coins back and will likely forever lose what you had, making it imperative to keep your private key safe.
There is Limited Bitcoin
Contrary to what some believe, Bitcoin’s supply is finite, and it is not possible to buy an endless amount of it. Much like oil or gold, cryptocurrency is a limited resource. Appropriately, bitcoin’s value continues to increase as the supply goes down.
The maximum amount of Bitcoin to exist, or its upper limit, is 21 million. According to estimates, the last bitcoin will be mined in 2140, after which its supply will eventually stop.
There are More than 7000 Cryptocurrencies
It seems like everyone wants to get in on crypto trading. That is why news currencies are popping up daily, and the crypto industry is constantly expanding. There are over 7000 cryptocurrencies in existence today. While most of these are not worth much, nor will they ever be, not all altcoins are trash.
There are many currencies other than Bitcoin, like Dogecoin, that have the potential to join the ranks of the most well-known virtual currencies. If you can spot a diamond in the rough before it becomes the next big thing, you can become rich indeed.
We all know that cryptocurrency is a digital currency without any central authority regulating it. However, there are several interesting facts about it that you may not have heard before. We hope you enjoyed reading our list of some of the cryptocurrencies’ not-so-known yet fascinating facts, leaving you astonished.