As the world transitions to online shopping and cashless transactions, it is no surprise that the popularity of virtual currencies is also on the rise. Bitcoin, Ethereum, and Dogecoin are just some of the more popular digital tokens gaining traction online.
However, as with any popularity surge in the financial market, there comes a time when the demand dips, leading to a price drop off. But is this dip temporary? Perhaps we may see another surge in prices soon enough? These are some of the popular questions many investors are no doubt asking themselves.
As a shrewd entrepreneur, you are also likely asking yourself the same questions. After all, buying low and selling high is one of the most fundamental concepts of any investment. Therefore, this current dip may sound like a valuable opportunity to jump on the bandwagon. However, are cryptocurrencies worth your time? Or is it already too late to invest in them? To know the answers to both questions, it is vital for you to discover your stance on this subject.
Believers and speculators
According to a tweet from Nick Maggiulli, Chief Operating Officer at Ritholtz Wealth Management, every crypto trader can be separated into two categories; believers and speculators.
The former group believes cryptocurrencies to be the “next big thing” and that they still have a strong future ahead of them. Thus, in preparation for its next big price surge, they continue investing in their preferred cryptocurrencies and holding on to them instead of cutting their losses now.
In contrast, the speculators deal and trade in cryptocurrencies as a form of high-risk, high-reward investment. They consider these digital tokens as another form of investment and nothing more.
Despite cryptocurrencies’ numerous advantages, many speculators believe their volatility makes them impossible to adopt as a payment method. It is also not difficult to see things from their perspective, given the recent extreme price drops for some of these virtual currencies.
How to start investing in cryptocurrencies?
No matter which side of the coin you fall on, there is no denying there is money to be made in cryptocurrencies. So if you are not deterred from the volatility of the market and still wish to invest in these digital tokens, you need to formulate a disciplined investment plan.
It is paramount for crypto traders to stick to their investment plans and not let their emotions overcome their rational thinking. When the market starts trending upwards, it is tempting to invest in more for fear of missing out. However, doing so can work against you more than it does for you. This is because the market may be behaving irrationally, and it is a short-term behaviour. So when the script starts to flip, you may find yourself losing more money than you have gained.
Is It too late to invest?
Due to cryptocurrencies’ inherent unpredictability, there is no clear-cut answer on whether it is too late to start investing in digital tokens for your business. However, with sufficient knowledge and research, it is possible to still profit from them via trading. As a general rule of thumb, financial planners recommend putting only a small stake into cryptocurrencies, typically 1-5% of your total investments and nothing more.
One last thing to note
Before you begin your investment in cryptocurrencies, it is essential to note that any profits earned from trading are taxable, so you have to declare your earnings when filing your company’s tax. However, these gains can be tax-exempted if they are a long-term investment as capital gains are not subjected to tax.
If you are unsure of whether you need to file your earnings as part of your company’s taxable income, then you should consider seeking the advice of a specialised accounting firm. At Ackenting Group, we provide a suite of tax and accounting services to help you plan your company’s taxes so that you can have peace of mind when reporting season arrives. Let our seasoned team of accountants provide you with sound advice on your cryptocurrency gains to ensure your company’s tax is filed correctly. In addition, we offer a wide range of corporate services, including hassle-free incorporation services for those looking to start a new business venture in Singapore.
Conclusion
With adequate research and a sound investment plan, cryptocurrencies can be a lucrative investment. However, due to its volatility, you need to be prepared to accept considerable risks and losses. Therefore, before committing to your purchase, you should consider whether this investment aligns with your company’s current investment strategies.
If you require any assistance on accounting services, feel free to drop us an email at johnwoo@ag-singapore.com or contact us at +65-66358767. At Ackenting Group, we offer a complimentary 30 minutes online consultation for us to better understand your business requirements.
