The traditional world has shown a growing interest in cryptocurrencies as the price of Bitcoin (BTC) continues to hit all-time highs. To put this interest in perspective, Researchers at the Cambridge Center for Alternative Finance recently found that 101 million people around the world currently own Bitcoin and other digital assets. According to the report, the number of identity-verified users of digital assets worldwide was around 35 million in 2018.
Given this growth, it should come as no surprise that crypto owners get the idea of giving away crypto this holiday season. Social distancing requirements amid the pandemic have resulted in virtual vacation gatherings and digital gifts being sent out in different regions.
While the idea of giving away cryptocurrencies to friends and family members sounds appealing, there are a few considerations to consider before sending them out to loved ones, especially newcomers.
Education comes first
Bill Zielke, Chief Marketing Officer at BitPay, one of the leading payment service providers for Bitcoin (BTC), told Cointelegraph that person-to-person sending cryptocurrency has always been popular, noting that given the rapid pace of the market, the company expects more consumers to do it this holiday season. “”While Bitcoin remains the crypto asset of choice for purchases, XRP and Ether (ETH) have grown dramatically in popularity with 8% and 7% of BitPay transactions respectively.“said.
However, when it comes to sending cryptocurrencies to new users, Zielke explained it Education is key as there are many coins and different ways to store them. There are also questions like whether the wallet being used is open source and non-custodial. Perhaps most importantly, the person who received the cryptocurrency should know what these terms mean.
The saying “Not your keys, not your Bitcoin” might come to mind here. While hardware and paper wallets are known to be more secure forms of cryptocurrency storage, enormous responsibilities come with these mechanisms.
Dave Jevans, CEO of blockchain intelligence agency CipherTrace, told Cointelegraph that when sending crypto to a beginner, it’s important to make sure they understand this basic rule of thumb: “Your worth, your responsibility“. Jevans announced that it is important that newcomers Understand the importance of protecting your private key, storing recovery phrases, and having a safe place to store the cryptocurrency once it’s received. Otherwise, there is a risk of losing access to funds.
For those considering a mainstream approach, Crypto Wendy O, a cryptocurrency YouTuber, told Cointelegraph recommends new users to create an account with a well-known exchange::
“I don’t like the idea that a newbie has to keep a ledger or a paper wallet as this is very unrealistic and complicated. In these cases, if a user loses their private key, they lose it. With Coinbase or Celsius, for example, cryptocurrencies are more accessible. “
Although Coinbase is one of the most popular digital asset platforms in the US, the service has its downsides too. Coinbase and other popular exchanges like Binance have had technical issues as the price of Bitcoin goes up. While ordinary crypto users may be aware of these service issues, This could be very worrying for newcomers.
Alternative ways to give away cryptocurrencies
While sending cryptocurrency directly to another user through a wallet address is the most common way of giving away crypto, Alternatives such as gift cards and ATM vouchers should also be considered.
Zielke announced that at BitPay more and more users are converting cryptocurrencies into gift cards. “”In November and December, buying gift cards with cryptocurrencies was our top performing category“He said. With well-known retailers like Amazon accepting gift cards bought with Bitcoin through various native crypto services, this could be a great option for giving away cryptocurrencies to newbies.
Additionally, Jevans pointed out that cryptocurrency ATMs like Coinme can provide depositors with coupons that can be redeemed by anyone. While this can be a great gift option, Jevans noted that most Bitcoin ATMs in the US require “KYC” verification in order to deposit $ 250 or more.
Cryptocurrency donations are also increasing
Not only do cryptocurrency donations give friends and family members cryptocracy, but they’re also a great way to give back this holiday season. Interestingly, there have been a number of new cryptocurrency-related fundraisers this year from major charities.
For example, Bitcoin Tuesday, scheduled for December 1 of this year, encouraged users to make donations in cryptocurrency to organizations like Save the Children, No Kid Hungry, and the American Cancer Society. The Giving Block, the company that sells cryptocurrency behind the virtual event, noted that this year’s celebration was an order of magnitude larger than last year. Most recently, The Giving Block, in partnership with the American Cancer Society, set up the first cancer research fund based entirely on donations in cryptocurrency.
Alex Wilson, co-founder of The Giving Block, told Cointelegraph that donating cryptocurrencies creates a virtuous donation cycle. He found that higher market prices often lead to more donations and acceptance by the world’s population. conventional. “”This is especially beneficial this year as the prices of crypto assets have increased so dramatically“said.
It is also noteworthy that the Salvation Army is accepting cryptocurrency donations this Christmas and is launching its first “crypto kettle” in the western United States. This unique initiative enables donors to give Bitcoin and Ether directly to the Salvation Army, one of the largest charities in the world. In a recent blog post, the organization found that these transactions are easy to complete and, more importantly, come with tax benefits.
The tax benefits associated with donating cryptocurrencies are certainly a consideration to consider. According to Taxbit’s “Crypto Gift and Gift Tax Guide,” donating crypto to a qualified charity is not a taxable event. The guide also states that donors make no income, profit or loss on a donation. If a donor held the cryptocurrency for more than a year before donating, You are entitled to the detailed charitable allowance for the fair value of the cryptocurrency at the time of contribution, in addition to not accruing any taxable profit on an estimated asset.
Justin Woodward, tax attorney at TaxBit, told Cointelegraph that there are huge tax incentives for donating cryptocurrency through an unrealized profit position. “”By donating valued capital to a qualified charity, you can avoid paying capital gains on any sale“said.
Next year could be the turning point for cryptocurrencies
While there are clearly a number of ways to give away crypto this year, Education remains key in deciding how to give back. In addition, it is clear that the widespread use of cryptocurrencies is still very widespread. Because of this, BitPay’s Zielke noted that 2021 could be the turning point for cryptocurrencies to truly “become a great gift for special occasions”.