CPA Practice Advisor

SEP 2018

Today's Technology for Tomorrow's Firm.

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SEPTEMBER 2018 ■ www.CPAPracticeAdvisor.com 7 FROM THE TRENCHES Here's a summary of what you need to know about cryptocurrency: Key Information TECHNOLOGY: Cryptocurrency Why is the new technology better? It makes electronic transactions frictionless and eliminates traditional banking methods How can you do this today? Bitcoin, Ethereum, Litecoin, XRP Ripple Risks Theft of tokens/coins Where/when to use When regular currency is too hard to transact How much? Value floats with the market, relatively high costs to mine and create When expected in mainstream Arriving now, more presence within two years Displaced technology or service Traditional world currencies Other resources Accounting Today, CPA Practice Advisor Implementing Cryptocurrency capture and processing into meaningful information is still complex and needs to be simpler. Recommended Next Steps How to get started with cryptocurrency using Ethereum as an example: ■ Create an offline wallet o There are many providers for wallets, but they mainly come in two categories, online and offline. o An online wallet is typically housed with an exchange and is used for trading. o An offline wallet is when the private key is stored offline and is best used for cold or long term storage of value. o If you plan on holding your investment long term, it is strongly recommended you store your investment offline in a private wallet you directly control. o When you create your wallet, it will create a public key and private key. ■ Your public key is what you share with other people. It is the destination address for people to send you funds. ■ Your private key is how you unlock your wallet and access your investment. You should back this key up in at least two secure locations and safeguard it as you would cash. o DO NOT STORE YOUR PRIVATE KEY UNENCRYPTED ON ANY DEVICE. ■ Create a trading account on a crypto exchange o There are dozens of U.S.-based exchanges to purchase currency. Some are geared toward new users, others on seasoned traders. o If you’re just getting started, check out Coinbase. o Seasoned pro? Check out Coinbase. ■ Purchase cryptocurrency on the open market – putting an order o Cryptocurrency is purchased similarly to traditional financial instruments. o Most orders are placed as either a market or limit order. A market order will fill the order at the current market price. A limit order will fill the order at a specific price, but only when that price is available. o You can fund your investment through a credit card, ACH, or wire transfer. ■ Transfer your purchase from the exchange to your offline wallet o Again, once your order has been filled, it is strongly recommended you transfer your money off the exchange to your offline wallet for long term storage. o You would transfer your funds to the public address of the wallet you created. It will take anywhere from 5 minutes to an hour for the transaction to post to your wallet. o Ready to sell or purchase something? Log into your wallet and send funds to another public address. ■ Watch the value o CryptoWatch - https://cryptowat.ch ■ An excellent trading tool for keeping an eye on virtually every currency and market in near real-time. ■ Highly customizable and allows you to focus on the markets, trading pairs and statistics that are important to you. ■ You can see the order books being processed in near real-time. o Coin Market Cap o https://coinmarketcap.com ■ Great site for tracking current price, volume, supply and market cap of top 1,500 cryptocurrencies. ■ Tracks performance of over 9,500 exchanges and markets. ■ Gives near real-time information across a currency or you can focus on a particular exchange market. ■ Great place to learn more about all the different blockchain applications. o Blockfolio - www.blockfolio.com ■ The price of cryptocurrency changes on a minute-by-minute basis. It is important to keep up to date while on the go. ■ Blockfolio can track your entire portfolio in near real-time and calculate your gain or loss right from your mobile device. ■ Blockfolio also gives you breaking news about cryptocurrency and blockchain technology. ■ It is a free app and available for both iOS and Android devices. Taxable Impact o Tracking tax ramifications of your investment can be difficult. Virtually every transaction will trigger a taxable event. As such, you need to know if you have a gain or loss every time you conduct a trade. o It is important to know your cost basis, sale price and date of every transaction. o CoinTracking can automatically import your portfolio and track your transactions. It is helpful in determining if you have a tax liability at the end of the year. o CoinTracking offers a free tier of their service that is perfect for the casual investor. They offer higher tiers for regular traders and professionals. o https://cointracking.info/ ■ Learn more o Reddit - https://reddit.com ■ Reddit is a social news aggregation and discussion site. It lets people create posts about news, share information, or discuss current events. ■ Posts are organized by subject into user-created boards called subreddits. All content is curated and moderated by the members of that subreddit. ■ Submissions are either voted up if deemed favorable or voted down if not favorable by the members of that subreddit community. ■ Wonderful tool to connect with others interested in blockchain and cryptocurrency. Contains the best discussion and latest news, but not always 100% accurate. o Subreddits ■ www.reddit.com/r/blockchains - Blockhains in general. ■ www.reddit.com/r/CryptoCurrency - All cryptocurrencies. ■ www.reddit.com/r/CryptoMarkets - Just the marketplaces. ■ www.reddit.com/r/Bitcoin - Everything about Bitcoin. ■ www.reddit.com/r/EthTrader - Everything about trading Ethereum. ■ www.reddit.com/r/litecoin - Everything about Litecoin. ■ www.reddit.com/r/altcoin - Everything but Bitcoin. ■ www.reddit.com/r/Futurology - Focused on future technology. ■ www.reddit.com/r/investing - Discussions about investing. Cryptocurrency is here to stay. Just as you learned about market instruments and eventually purchased stocks, bonds and other holdings, we expect many will do the same with cryptocurrencies. While theft has occurred, and fraud is certainly possible, you can see from the numbers in this article that this is a very active market. We’ve tried to give you enough background to understand some of the fundamentals of the cryptocurrency market. Will you participate? ■

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