Handling Cryptocurrency Investments.

Hi everyone,

                           I did a customary search on the forums for other posts, but crypto investments seem to be scarce to find. I wanted some inputs on how to handle crypto investments on CoinBase as such.

My current approach, or potential approach is to have an account, unlinked, for CoinBase. I have categories set aside for all my investments individually, and as and when I buy cryptocurrencies on CoinBase, I just move the funds into that account. In the end, I just use it to track my net worth growth and such, since I don't think YNAB is actually setup to handle investments as other apps are. 

Would you folks agree with this method, or are there any changes that you might suggest?

nolesrule , I vaguely remember you having some inputs on cryptocurrencies at some point, not sure on what post. Your thoughts?

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  • Your current approach is what I do. I treat my Coinbase account exactly the same as my other investment accounts. It’s an unlinked tracking account. I update the balance at the end of each month to the current value. 

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      • LoaferDude
      • furious_falcon
      • 2 mths ago
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      Superbone Wonderful. Okay, appears I am not so off-base after all. :) Thanks a ton.

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 2 mths ago
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      LoaferDude No, I would say you’re exactly on base. Coin base, that is. 😉

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      • dakinemaui
      • dakinemaui
      • 2 mths ago
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      Superbone When did you switch to a tracking account?

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 2 mths ago
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      dakinemaui I've always had my crypto currencies (Coinbase) as a tracking account. It's just a small amount of experimental funds that I'm prepared to lose. In fact, everything in it is gravy at this point. I sold my original investment a couple years ago.

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  • I think how you are handling it is fine.

    My main thought on cryptocurrencies is that is is speculating and not investing (this is true of all currency purchases with the intent of making money). There's nothing inherently wrong with that as long as you understand the differences between the two.

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      • LoaferDude
      • furious_falcon
      • 2 mths ago
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      nolesrule Could you please elaborate on how you separate the two philosophies? It would be interesting to hear how you think about it. :) 

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 mths ago
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      LoaferDude Investing is based on the fundamentals and factors. For example, one invests in stock because you expect a company to make a profit from its business. You pick which businesses to invest in based on their fundamentals. One invests in bonds for the expectation of an income stream from interest payouts.

      Speculating is more based on trying to take advantage of the price fluctuations themselves. It's a bet on the value of an asset. Buying and selling currency falls into this category. It's no different than comic books, baseball cards, stamps, gold, pork bellies. This is going to be the case for any asset that doesn't actually do something except retain or lose value.

      One can speculate in stock too.... that's what day traders do.

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      • LoaferDude
      • furious_falcon
      • 2 mths ago
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      nolesrule Yes, that definitely makes sense. Just in a manner of discussion, what would you term putting money into companies that offer ICOs for their products built on top of block-chains? For example, ChainLink and such? Their model is to crowdfund their crypto-based IPOs and they are talking working products, not just speculation on the fluctuation in currency. Would that count as an investment? Or would you still put that in a gray area that we still don't know? :) 

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 2 mths ago
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      LoaferDude Are you talking about putting money into the companies developing the underlying technology rather than into the currency itself?

      I think that would be analogous to putting money into precious metals mining companies rather than into precious metals itself.

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      • LoaferDude
      • furious_falcon
      • 2 mths ago
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      nolesrule Yup. So basically, I understand your differentiation of speculation and investing. If we take, let's say BitCoin or Ethereum themselves as an example, you are speculating on the value fluctuations of the cryptocurrency itself and trying to make money from it.

      The underlying technology is a block-chain and there are companies that build products on top of block-chains that do different things. The only difference in the approach to an IPO is that it is mostly cryptocurrency based. So you would be investing in the company with your cryptocurrency and they offer you returns in terms of their cryptocurrency, which now you will have a stake in to see it grow. Does that make sense? 

      So now, you have a gray area where you are technically 'investing' in a company and its ability to grow its market cap, but then you are also doing that by speculating on the underlying technology. Many times, that underlying block-chain based product in built to solve some problem in the cryptocurrency space. So it technically bleeds over into speculating about the cryptocurrency itself, at some point. That is what was interesting to me when you made the distinction. :) 

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