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A crypto asset is a digital asset that uses cryptography to secure its transactions and to control the creation of new units. Cryptocurrencies are the best-known examples of crypto assets.
Benefits of owning a crypto asset include:
- Crypto assets can be used to pay for goods and services online
- Crypto assets are often faster and more efficient to transact with than traditional fiat currencies.
- Crypto assets can be stored in a digital wallet and traded on decentralized exchanges.
- Crypto assets are often more volatile than traditional assets, providing the potential for greater profits (or losses).
- Crypto assets are not subject to government regulation or control, making them attractive to individuals who wish to avoid traditional financial institutions.
How to calculate crypto gains
Individuals who own crypto assets may incur gains or losses when they sell or exchange their tokens. Crypto gains or losses are calculated by subtracting the purchase price of the asset from the sales price. If the sales price is higher than the purchase price, then the individual has made a gain; if the sales price is lower than the purchase price, then the individual has made a loss.
Gains and losses from crypto assets are treated as capital gains or losses for tax purposes. This means that they may be subject to capital gains tax. In the United States, for example, long-term capital gains (gains on assets held for more than one year) are taxed at a lower rate than short-term capital gains (gains on assets held for one year or less).
How to calculate your profits and losses on a crypto investment
If you’ve made a profit on your crypto investment, congratulations! Now it’s time to calculate how much tax you’ll owe on your gains.
To calculate your profits, start by subtracting your cost basis—the price you paid for your crypto tokens, plus any fees or commissions—from the sales price. If you sold your tokens for more than you paid, you have a capital gain; if you sold them for less, you have a capital loss. For example, let’s say you bought 10 Bitcoin tokens for $1,000 each, for a total cost basis of $10,000. If you then sold those tokens for $15,000, you would have a capital gain of $5,000.
If you’re not sure what your cost basis is, don’t worry—most crypto exchanges will provide you with this information when you sell your tokens. Once you’ve calculated your gain or loss, you can use that information to calculate the taxes you owe. In the United States, long-term capital gains are taxed at a lower rate than short-term capital gains. The exact tax rate you’ll pay depends on your income level.
The best way to store your cryptos for long-term safety and security
If you’re planning on holding onto your crypto assets for the long haul, you’ll need to find a safe and secure way to store them. The best way to do this is by using a hardware wallet. A hardware wallet is a physical device that stores your private keys offline. This means that even if your computer is hacked, your keys will remain safe. Hardware wallets are the most secure way to store your crypto assets, and they’re relatively easy to use.
The most popular hardware wallets on the market include the Ledger Nano S and the Trezor Model T. If you’re not sure which one to choose, check out our list of the best hardware wallets.
How to keep your crypto safe from hackers
While hardware wallets are the safest way to store your crypto, they’re not foolproof. If a hacker gets their hands on your hardware wallet, they could theoretically access your funds. That’s why it’s important to take steps to protect your device.
Here are a few tips to keep your hardware wallet safe from hackers:
- Keep your device in a safe place, like a lockbox or safe.
- Don’t connect your device to public Wi-Fi networks.
- Use a strong password for your device, and don’t forget it.
- Don’t store your recovery seed in a place where it could be stolen or lost.
- Keep your firmware up to date.
By following these simple steps, you can keep your crypto safe from hackers.
