Trendsterkini.com – Today you can buy more things than ever with cryptocurrencies, from video games to new furniture. But should you?
“I wouldn’t do it,” said Kiana Danial, author of “Cryptocurrency Investing for Dummies” and the personality behind @Investdiva on Instagram. While there are some circumstances where it might make sense, the practical answer for most people is no.
Cryptocurrency markets are notoriously volatile, and the price you pay for an item today may not be the price you buy tomorrow.
Also, many companies experimenting with crypto payments only accept Bitcoin, which experts say is one of the worst cryptocurrencies you can choose to pay for something.
However, people are interested in how cryptocurrencies can work as a payment method. Nearly 20% of all US adults say they are more likely to make purchases with crypto.
According to a recent report by PYMNTS.com, a news and research platform for payments and trading. But before you cash out your Bitcoins to top up your Starbucks app, here’s what the experts are saying about shopping with crypto:
Don’t pay with Bitcoin
Bitcoin, the first cryptocurrency, was originally intended to be used exactly like money. His white paper called it a “peer-to-peer electronic money system.” But Bitcoin’s frequent and volatile price fluctuations make this unrealistic in practice.
“Price volatility makes it useless as an electronic money system,” said Ollie Leech, learning editor at CoinDesk, a major cryptocurrency news outlet.
“No person in their right mind would want to buy coffee with Bitcoin. Let’s say you pay $3 for coffee, and tomorrow your Bitcoin could be worth $30. That’s a loss.”
Just a year ago, in June 2020, the value of Bitcoin was below $10,000. Since then, it has peaked at over $64,000 and despite the recent price drop, it remains close to the $40,000.
Imagine a video game that cost $50 in Bitcoins last June. If you waited until today to buy it, the same price in Bitcoin today would cost you $200.
People buy Bitcoin “not because they expect to go into a store and spend it, but because they expect it to hold its value,” said Galen Moore, director of data and indexes at CoinDesk.
What about other cryptos?
Bitcoin has failed its intended mission of becoming the new currency, but experts say there are other cryptocurrencies that are better for trading. “Each of them is optimized for certain things.
For example, you will not go to the store and pay for purchases with gold,” said Daniel, in the same way that you cannot spend Bitcoin on your morning latte.
Some popular cryptocurrencies designed specifically to work best for spending include Dash, Manero, and XRP, according to Danial.
StableCoins, such as Tether or USD coins, can also be better alternatives to purchases, as their prices are tied to the existing currency.
“There are currencies that are more like cash,” said Pat White, co-founder and CEO of Bitwave, a company that helps businesses with cryptocurrency tax filings.
These coins are a better option to spend, in theory, thanks to faster processing and lower fees. “They are designed to wear out and be used very quickly.”
But in reality, there are still downsides to using crypto that was developed to mimic cash to make payments. Take Bitcoin Cash (BCH), for example.
BCH was born after the original Bitcoin proved too volatile to be used as a new kind of money on the Internet. A group of creators decided to part ways with the original crypto and create Bitcoin Cash.
Which is designed as a more stable version to use for transactions. But in practice, Bitcoin Cash is still very volatile.
In the past year, its price has risen from around $250 per coin to more than $1,500, highlighting the risks of using it to buy something at the wrong time.
Taxes are another complication. While you do not need to report your cryptocurrency purchases to the IRS, you do need to report when you exchange cryptocurrency for goods or services.
Every time you make a purchase with crypto, you should keep track of your cost basis, or the fair market value of the crypto when you bought it compared to when you normally traded, and report any gains or losses on that equity.