What You Need to Know Before Investing in Cryptocurrency

What is Cryptocurrency?

Cryptocurrency is a digital currency that exists online and was invented in 2008 by an anonymous entity known as Satoshi Nakamoto!  It is a speculative currency and whilst it can be used to buy items in some shops, its mainly traded as a digital asset to make a profit from investment returns.  The first ever Crytocurrency was Bitcoin, but there are now thousands of them available – over 18,465 in March 2022.



Why is Crytocurrency different?

It is not linked to any country or government.  It uses a decentralised system to record transactions.  Records of who owns what are held on computerised databases, secured by strong cryptography using blockchain technology.  Because of its nature Cryptocurrency does not rely on banks to verify transactions.



What is Blockchain Technology?

Essentially is a system of recording information online which makes it difficult to change, hack or cheat the system.  Think of it as a virtual or digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain.


Each block on the chain contains a number of transactions and every time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s ledger.



Do you invest client funds in Cryptocurrency?

The answer is NO.  Cryptocurrency is a speculative currency.  Its markets are not regulated and are extremely volatile.

The assets that we DO invest in are:

1. Global Market Equity Funds
2. Fixed Interest Funds (Corporate and Investment Grade Bonds)
3. Commercial Property Funds
4. Alternative Investments Funds (Commodities and Derivatives)
5. Cash




The Pros and Cons of Crytocurrency?    


The technology behind Blockchain is game-changing and will be extremely useful to other industries enabling them to develop de-centralised databases, making businesses more efficient. Transactions will be carried out speedily and will be more cost effective.

We know Crytocurrency is speculative and high-risk and potentially you could make a lot of money if you were lucky.  We have all heard the good luck stories about Crytocurrency.  Investors making impressive profits from buying and selling on cryptocurrency exchanges – the good luck stories.

However as I draft this article, Cryptocurrency prices have fallen to their lowest level in 2022 and are now worth 50% less than its all-time high!!

  • Crytocurrency is risky. It is a speculative investment where prices can be very volatile and so you can lose your money very quickly.
  • Combine that with a market that is unregulated means you can lose ALL of your money.
  • It is not easy to spend!
  • It is open to fraudulent scams with over 25% originating on social media


Tax Returns         

If you have invested in Crytocurrency and sell on, you have to make a return on the CG1 Form whether you have made a profit or loss!

Capital Gains Tax @ 33% is levied on crystallised gains of more than €1,270 in any year.

If you sell at a loss, you can use the loss to offset gains on the sale of any other assets within the same year potentially reducing your capital gains tax bill.


Our Opinion

Cryptocurrency is not for most people.  If you take the plunge and invest in Crytocurrency you should only invest what you can afford to lose.  Think of it as a gamble.

Warren Buffett, one of the most famous investors worldwide, has said he wouldn’t take all the Bitcoin in the world for $25. His takes the view that ‘’assets, to have value, they have to deliver something to somebody’’.

If you wish to speculate take a chance on Cryptocurrency.


If you want to find out more about investing in the stock market in funds that are tailored to suit your own personal risk/reward profile, why not reach out to Gráinne Ryan on grainne@sunrisefinancialplanning.ie or 061 412388.