What All Crypto Financial Advisors Need to KnowJuly 4, 2022
Advisors must keep up with emerging technologies and trends to give their clients well-informed advice. Here are some of the essentials that every crypto financial advisor needs to know SoFi bank account before entering the game.
How Does Cryptocurrency Differ from Traditional Currencies?
Cryptocurrencies are entirely different from fiat currencies (dollars, euros, etc.). According to the experts at SoFi, “These virtual currencies don’t come from any country’s central bank like normal currencies, and they aren’t associated with any material form.” Instead, all cryptocurrencies run on blockchain technology – an encrypted electronic ledger that logs every transaction and stores it in a decentralized database.
Crypto and Taxes
Crypto is considered a capital asset. Capital assets are not taxed until sold for fiat currency. When you sell a cryptocurrency for fiat, that amount of cryptocurrency is considered income.
ICOs, STOs and Venture Capital
An initial coin offering (ICO) is a fundraising technique that trades future crypto coins in exchange for cryptocurrencies of the immediate, liquid value.
If you’re not already familiar with them, Security token offerings (STOs) are essentially a cross between an ICO and an IPO. However, most of their characteristics are similar to IPOs.
This type of investment is most common among high-growth technology companies that require large amounts of capital and human resources. For example, when venture capitalists fund a company, they want a stake in it, which means equity for their investment.
Trading Cryptocurrencies for Businesses
You can make your trades: Hire someone else to do it or do it yourself. Either way, you should keep a few things in mind before you start trading cryptocurrencies for business use.
A cryptocurrency wallet stores your cryptocurrencies on a digital system to make them accessible. For example, a SoFi bank account gives you access to your account and crypto-funds. Although there are several wallets, they can fit into two main categories: hot wallets and cold storage. Hot wallets store your cryptocurrencies online, making them easy to access and vulnerable to hackers. Cold storage lets you stash your BTC or ETH on a USB for more security.
Be Prepared for Loss
Investing in a new currency can be risky. Only invest what you can afford to lose and have a plan if things go wrong.
Steer Clear if You’re Risk Averse
If you don’t have a strong stomach for risk, it’s probably best to stay away from cryptocurrencies. So there’s a lot of volatility in these markets that could wipe out your savings overnight.
The 10% Rule of Thumb
Invest no more than 10% of your investment portfolio in any one ICO or Cryptocurrency (or make sure you understand the underlying risk factors). Before investing in an ICO, ensure that the client thoroughly reads through the ICO’s white paper.
Ways to Make Money by Investing in Cryptocurrency?
There are many ways that you can make money by investing in cryptocurrency. Here is a list of them:
Make Use of Leverage
Leverage can help you earn a lot more money in a short time with cryptocurrency, though you will have to put up your capital as collateral.
You Can Earn Money by Providing Liquidity
Will be able to charge a fee if you’re willing to buy and sell cryptocurrency for other people on exchanges.
You Can Earn Money by Providing Trading Signals
If you’re skilled at technical analysis, you may be able to publish your trading signals on blogs and social media and make money by selling them.
Clients will be looking for guidance on cryptocurrencies, as they are a hot topic. As a result, advisors must learn about cryptocurrencies and how they work to provide accurate information to clients. Look no further than the experts at SoFI Invest (SoFi Bank) for the best advice.