PERSPECTIVE: The Importance of Keeping Track of Your Cryptocurrency
Keeping track of your cryptocurrency is a “must-do” if you are serious about looking after your precious digital currency.
When you first dipped your toes into the world of cryptocurrency, it was exciting — right? Setting up your first crypto wallet, signing up for an exchange and making that first trade into cryptocurrency. But since then, like many of us, you’ve probably signed up for multiple exchanges, and may have cryptocurrency sitting in a number of different places. Do you know exactly how much and where all your cryptocurrencies are located?
Having a proper system in place to record, track and monitor your portfolio will help in many ways, and is worth the initial effort.
Why is it important to separately keep track of your crypto?
Here are a number of top reasons:
1. You have a separate record of trades, holdings and other relevant information available if ever you can’t access that information from its source.
2. It’s necessary for accounting and taxation purposes. In most countries, you need to keep records for any potential tax gains/losses or trading income which need to be declared with your relevant tax authorities.
3. It gives you an overview of your portfolio and makes managing your funds easier.
The last point is especially relevant for serious traders who need to keep an eye on their portfolio and require up-to-date information in order to make informed decisions on trades. Having a portfolio tracker can help to monitor prices, trends and more.
What information should I be recording?
First off, it’s always a good idea to record wallet addresses for your records. This is the public address that can be searched on popular blockchain explorers such as https://www.blockchain.com/explorer (for Bitcoin transactions) and https://etherscan.io (for Ethereum based tokens).
For example, with the recent Cryptopia hack, many people had coins sitting in wallets there. With the exchange currently suspended and inaccessible, some users may have no idea how many coins they had on this exchange. If they had recorded the wallet address, or used a 3rd party software/app to record their transactions, then they’ll know exactly how much and which coins they hold. This can be very useful for claims, tax purposes and more.
The next point is that all purchases, trades, withdrawals and transfers should be recorded for tax purposes. While many people think that tax and cryptocurrencies are optional subjects, beware such naïve beliefs. Some people may never be required to pay taxes on their cryptocurrency, but many will however. By having proper records, it will save you stress and extra work later on down the track.
What’s the best way to record your crypto transactions?
That’s a great question and it depends on your circumstances. If you’ve only bought one or two types of coins ever, and are holding them for the long-term, then maybe a simple document or spreadsheet will suffice to record these transactions. Write down the date, amount, type of coin and also the wallet address where it is held.
However, most crypto enthusiasts will have multiple transactions, possibly spread over multiple exchanges and wallets. Therefore a 3rd party solution is best to easily track your portfolio.
A quick search (such as searching for “Cryptocurrency tracker”) on Google or your smartphone app store will list many such solutions to keep track of your cryptocurrencies for you. Therefore, do your own research and find a coin tracker that works well for you.
I personally use CoinTracking, which supports all major coins and cryptocurrency exchanges. They also offer API integration so that trades can be automatically input, which is great for those who trade frequently. It’s free to use for the first 200 trades, or you can pay if you are a more frequent trader for higher transaction limits. It may not be the best portfolio tracker out there, but it certainly has many features and suits my needs very well.
Other popular coin tracking solutions include:
· CryptoCompare
· Delta
· Blockfolio
· Cryptonaut
Cointracking, CryptoCompare, Delta and Blockfolio usually show up in the top lists when comparing portfolio trackers. Cryptonaut is also a solution for multi-language support, as not all trackers offer languages other than English.
With many solutions out there, and more being added to the market regularly, there is no excuse not to get your crypto affairs in order today. A little time and effort to record your crypto transactions today will ensure peace of mind in the future.
