Elon Musk is a smart man. But, he ain’t no investment advisor.
Like any other businessman, his investments align with his values and financial goals. He is a risk taker and a serial entrepreneur. A signifcant investment in Dogecoin aligns with who he is, but, does the same type of investment align with who you are?
For those who have recently jumped on the cryptocurrency bandwagon, make sure you understand the use, value and tax implications of Dogecoin transactions. This will help you determine whether or not it is the right investment for you.
Here are four quick facts about this buzzworthy currency:
It’s (currently) popular
Dogecoin is a cryptocurrency originally created as a sacracastic joke for crypto enthusiasts. Today, its popularity has attracted influential investors and it holds market value within the Top 10 of more than 6,000 publicly traded cryptocurrencies.
In contrast, Bitcoin has a 21 million supply cap. The supply cap means the demand for Bitcoin has the potential to exceed supply and increase the value of the asset.
It’s revolutionary
Dogecoin considers itself a revolutionary cryptocurrency. Its “claim to fame” is its ease of use to pay for goods and services. This type of reputation is an ideal fit for our “instant” generation.
It’s unlimited
Different from other top cryptocurrencies, Dogecoin does not have a supply cap (a limit on how many coins can be created). This restricts its ability to store value.
It’s volatile
Large, short-term investments in Dogecoin are best for those with a high appetite for risks. Unlike Ether, a rival cryptocurrency, the technology behind Dogecoin does not allow for applications, borrowing money or any other functions aside from buying and selling. This limitation, in addition to its limitation to store value can make its worth speculative. The current volatility of this digitial asset can produce large gains or significant lossses.
It’s taxable
Virtual currency is treated as assets for tax purposes. The sale or other exchange of virtual currencies, or the use of virtual currencies to pay for goods or services, generally has tax consequences that could result in a tax liability.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for investment, tax, legal or accounting advice. You should consult your own investment, tax, legal and accounting advisers before engaging in any transaction.