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What cryptocurrencies are and what you should know

By Goldman Sachs Ayco Personal Financial Management

A cryptocurrency is a decentralized digital coin. It allows users to make transactions and store the currency in a secure manner using an alias. Blockchain is the critical and differentiating infrastructure that underlies cryptocurrencies. The blockchain is essentially a log or history that is resistant to editing because it has no single owner.


  • Trade on digital exchanges, can be block traded and options/futures can be bought on offshore exchanges
  • As a category do not have a natural supply limit, unlike metals, such as gold
  • Total market cap equates to less than 2% of the value of all the mined gold in the world1
  • Top cryptocurrencies by market cap2
    • Bitcoin
    • Ethereum
    • Bitcoin Cash
    • Ripple
    • Litecoin
    • Dash
    • IOTA
    • NEO

Potential benefits of cryptocurrencies:

  • Easier to transfer funds
  • Difficult to counterfeit because of security features
  • Blockchain is used to store an online ledger of all transactions that have ever been conducted
  • By design, a new blockchain is created every 10 minutes

Potential risks of cryptocurrencies:

  • A digital currency does not have a central repository, so it could be wiped out by a computer crash if a backup copy does not exist
  • Threat of hacking digital wallets, exchanges or the cryptocurrency company itself
  • Given they operate across geographic and jurisdictional borders, ambiguity as to their legal and tax status
  • Uncertainty whether cryptocurrencies are a currency or commodity (varies by country, government and application)

Tax considerations if you’ve invested in cryptocurrencies:

In 2017, the rising price of cryptocurrencies raised a general awareness among taxpayers as to associated income tax issues. Because US tax law treats cryptocurrency positions as a type of intangible personal property and not as “money,” even casual transactions into and out of cryptocurrencies can create tax reporting obligations that might not be intuitive.

If you’re invested in crypotcurrencies, be sure to make your Ayco advisor, coach or your personal income tax advisors or preparers aware of any transactions such as:

  • Exchanging cryptocurrency positions for the US dollar, for a foreign currency or a different cryptocurrency
  • Using any cryptocurrency to purchase goods or services
  • Acquiring any cryptocurrency position using any property other than US dollars
  • Any charitable donations of cryptocurrency positions

Want to learn more? Check out other articles from AYCO on financial planning and more.


Goldman Sachs Ayco Personal Financial Management

This material was prepared by The Ayco Company, L.P. d/b/a Goldman Sachs Ayco Personal Financial Management (“Ayco Personal Financial Management” or “Ayco”), an affiliate of United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”). This material was prepared for informational purposes only and should not be construed as personal financial planning, investment, tax, accounting, or legal advice. No investment decisions should be made using this data. GS PFM believes the material used for the article is accurate, but does not verify its accuracy independently and does not warrant or guarantee that is it accurate or complete. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. ©2021 The Ayco Company, L.P., d/b/a Goldman Sachs Ayco Personal Financial Management. All Rights Reserved. Brokerage services are offered through Goldman Sachs & Co. LLC and Mercer Allied Company, L.P. (a limited purpose broker-dealer), both affiliates of Ayco and members FINRA/SIPC.

Additional materials and revisions by © 2021 United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management. All Rights Reserved.

United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization.

The information contained herein is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. GS PFM does not provide legal, tax, or accounting advice. Clients should obtain their own independent legal, tax, or accounting advice based on their particular circumstances. Please contact your financial adviser with questions about your specific needs and circumstances.

Information and opinions expressed by individuals other than GS PFM employees do not necessarily reflect the view of GS PFM. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.

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