Blockchain and cryptocurrencies: a comeback in style?

For many people, cryptocurrencies represent a liberation from the traditional financial system and state money through decentralisation and greater anonymity. For others, they are a great long-term investment opportunity, and for still others they are a way to get rich quick. Those who trust them and follow their long-term development will not be deterred by their relative volatility and changeability. And on the whole, it is paying off. For every time skeptics prophesy the end of Bitcoin (and other cryptocurrencies), it wipes their eyes with its resurgence.

Predictions that cryptocurrencies will completely replace our current fiat financial system are still more in the realm of science fiction. But there is no doubt that this is one of the interesting investment opportunities where a large number of people are depositing part of their capital.

 
Cryptocurrencies currently on the rise

After the peak of the four-year cryptocurrency cycle in 2021, there was a sharp drop of tens of percent, from which cryptocurrencies are currently picking up again and some experts believe a new cycle is underway. Even the recent collapse of three US banks has not affected the rise in Bitcoin prices.

The world of cryptocurrencies is also driven by the increasingly popular NFT tokens, i.e. Non-Fungible Token (proof of ownership of a digital item such as an image or a song). This proof of ownership is stored on the blockchain and you can of course sell it at any time, most often for the cryptocurrency Ethereum.

At the moment, NFT tokens are becoming particularly interesting and increasingly traded - similar to real-world art, for example. So it may actually be a modern collectible. Only instead of a collection of rare stamps, you own digital items. So if you're tempted to invest in cryptocurrencies, you might find NFT tokens interesting.

 
Cryptocurrencies under the scrutiny of the tax administration

Gone are the days when the legislature was virtually oblivious to cryptocurrencies and didn't care about your profits from the industry. It still has some loopholes, but it has got the average cryptocurrency investor covered. However, their taxation can be quite complicated and if you are not familiar with the issue, you'd better get advice from an accountant who deals with this topic.

In the Czech Republic, cryptocurrencies are considered intangible movable property (not cash) and it differs whether you handle them as an individual or a legal entity.

The basic thing you need to know is that the difference between the purchase and sale price of cryptocurrency is taxed in the Czech Republic at 15% (if your income is less than 48 times the average wage, then it is 23% and 19% for legal entities). The exchange of one cryptocurrency for another or the exchange of cryptocurrencies for goods should also be taxed.

Please note - it is not true that the possession and exchange of cryptocurrencies is completely anonymous. At a minimum, the cryptocurrency exchanges you buy through will want to verify your identity with an ID or other proof. The tax authorities may then request a statement from the cryptocurrency exchange of the transactions that have taken place under your name. Not to mention that all transactions are recorded on a publicly accessible blockchain.

 
Cryptocurrency mining in 2023

Although cryptocurrency mining is significantly more complex than in the past, it is still popular (and up to 40% more profitable than buying cryptocurrencies). If cryptocurrency is your way to get rich, make sure you have a trade for it. This is because in the Czech Republic, it is seen as a business and you must have a trade license for it. And if, as an individual, you make a profit from mining them, again you must tax it at 15%.

Interesting Fact: Cryptocurrency mining is one of the reasons for the huge increase in graphics card prices in recent years.

 
Investing with sense

You should definitely have cryptocurrencies in your investment portfolio, although generally speaking, their share should be in units of percentages, while the share of stocks should be in tens of percentages. If crypto is a means of long-term investing for you, rather than getting rich quick, it's certainly worth even sticking to the adage that it's a good idea to buy Bitcoin regularly regardless of the current price, and hold it no matter how much it goes down or up.

Tip: Don't buy "shitcoins" and get rid of them in favour of Bitcoin, which is sovereignly the most stable (or invest in other "stablecoins"). But don't hold them on an exchange, transfer them to a virtual or ideally hardware wallet.

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