10 Things You Should Know About Bitcoin

Canadian citizens buy Bitcoin Crypto What? – Cryptocurrency is a relatively new digital currency that’s an alternative to the US dollar and other traditional currencies. Bitcoin was created in 2009 and is the largest and oldest cryptocurrency.
Mystery Man – Bitcoin was the brainchild of Satoshi Nakamoto, a pseudonym used by the author of a white paper written in 2008. Several people have claimed to be Nakamoto, but his or her true identity remains a mystery..
	Fasten Your Seatbelts – Bitcoin had nearly as many dramatic price drops in 2023 as stocks had in 2008—the most volatile year for stocks on record due to the Global Financial Crisis (FIGURE 1).
	Put on Your Thinking Cap – Bitcoin is created when programmers solve complex computations that are added to the blockchain—the public ledger that records all Bitcoin transactions. This process, known as mining, requires a lot of time and significant computing power.
	Finite Supply Creates Scarcity – The maximum number of Bitcoins that will be created through mining is 21 million. As of December 2023, there were about 1.4 million Bitcoins left to be mined.1 This finite supply is one reason why some people believe Bitcoin will increase in value over time.
	What's in Your Digital Wallet? – Bitcoins are purely digital and stored electronically in programs called wallets that are secured by passwords. Once you transfer Bitcoin to someone else, there’s no way to retrieve it or dispute the transaction.
	Save Some Gains for Uncle Sam – The IRS treats Bitcoin as property rather than currency. If you receive Bitcoin as compensation, it’s considered taxable income. You also need to calculate your gain or loss every time you spend Bitcoin. Short-term gains (<1 year) are taxed as ordinary income, and long-term gains (1 year or more) are taxed as capital gains. Tax losses are treated the same as stocks.
	Don't Lose Your Password! – Around 20% of Bitcoin, valued at approximately $140 billion, is lost forever because people forgot their passwords.2 Download our free "Get It Together" worksheet to organize all your financial records, including cryptocurrency passwords.
	Value Is in the Eye of the Beholder – Unlike stocks and bonds, Bitcoin doesn’t have any intrinsic value based on corporate earnings or cash flows. Therefore, when risk assets3 such as stocks come under stress, Bitcoin’s price may fluctuate wildly. But as with traditional currency, Bitcoin has value as long as people accept it as currency. Platforms such as PayPal and Square accept payments in Bitcoin, but a conversion to a fiat currency is required before the payments settle.
	Digital Gold? – Some institutions and wealthy investors are using Bitcoin as an alternative asset class similar to gold (some call it digital gold), though it remains to be seen if this trend will continue in light of large-scale crypto scandals and the lack of regulation.