Increasing regulatory oversight and the latest progression made in the crypto movement means that users are tasked with keeping track of their cryptos in a clear and auditable way. Maybe it’s time to turn to crypto accounting software?
These are complicated days for the crypto economy. Having already endured a profound and well-publicized boom and bust cycle, digital currencies have come out on the other side more diverse and expansive than ever before.
When Bitcoin first rose to prominence, it did so mainly on its own merits and hype. As the only major player in town, it had little competition and all of the name recognition, making Bitcoin’s market dominance unparalleled.
While it continues to be extremely popular – and still has the largest market cap of any digital token – the ecosystem is becoming increasingly crowded, and Bitcoin is far from the only player. According to data compiled by CoinMarketCap, Bitcoin’s dominance is more than 30% less than it was at the end of 2017 when the token held 85% of the collective crypto market cap.
Of course, this is undoubtedly a good thing. Greater competition creates better and more usable tokens that help the crypto movement make the mainstream debut that it’s been on the cusp of for years. At the same time, it makes crypto portfolio tracking more critical than when users simply managed a single Bitcoin wallet, injecting both possibility and complications into the process.
The Growing Ecosystem
Nowhere is the crypto expansion more evident than in the recent launch of Binance Chain and Binance DEX, a decentralized crypto exchange that runs on the new blockchain. Until then, Binance operated on Ethereum’s popular blockchain, where hundreds of other altcoins reside as well.
Now, with multiple prominent platforms used for launching and engaging with alternative digital tokens, the decentralized economy can be becoming bigger while also producing dueling allegiances.
For instance, Binance users can convert their Ethereum-based ERC-20 tokens to the new blockchain in a 1:1 swap, but they can also continue using them on the Ethereum blockchain. Meanwhile, new platforms are clamoring to gain a listing on the new Binance DEX, something that was once reserved primarily for Ethereum’s blockchain.
Moreover, the crypto expansion isn’t limited to just industry platforms. Even traditional financial institutions are expanding the ecosystem.
Last week, Bloomberg reported that Fidelity, a financial management company with nearly $2.5 trillion in assets under management, was close to release its crypto custody service. They join a list of prominent institutions pursuing this approach.
Each of these services creates new ways for crypto products to come to market, making them more usable and accessible to more people. It also necessitates a new plan for keeping track of all these tokens.
Keeping Track of Crypto
Increasing regulatory oversight and the above-board progression of the crypto movements means that users are tasked with keeping track of their cryptos in a clear and auditable way.
Currently, the U.S. tax system considers cryptocurrencies to be an investment, with tax consequences accompanying appreciation and tax benefits deriving from depreciation. Although crypto investors are engaging with many different platforms, they need a singular mechanism for tracking and recording their tokens.
Many are turning to crypto accounting software to achieve these results. The right software can combine many disparate tokens into a single platform that allows users to easily manage and track their investments, consolidating an otherwise complicated endeavor.
As a result, crypto accounting is already becoming a significant endeavor for many companies.
Regardless of the methodology, crypto users need a plan for storing, tracking, and accounting for their different assets. Cryptocurrencies have evolved considerably since the days when Bitcoin was the only token in town, and now it seems like new platforms are continually emerging, bringing innovation and forward thinking along with them.
This is overwhelmingly positive for users, but it means that they need a plan for managing their crypto assets so that they can positively and confidently participate in this expansion.