Cryptocurrencies have entered the mainstream conversation, no longer confined to the realm of fintech enthusiasts. Their volatile nature and dramatic price fluctuations have ensured that even the least tech-savvy individuals are aware of them, as they’ve been making headlines globally.

When considering whether to invest, the potential for future appreciation makes them an intriguing and flexible gift option.

The world of cryptocurrency gifts offers a dual function: they can act as speculative assets or as digital cash equivalents for online purchases. Whether you opt for a gift card or use a crypto exchange, these digital forms of currency have become accessible. It’s crucial to secure offline storage for accessing information, especially if the recipient is new to cryptocurrency. As long as the gift remains under the annual gift tax exclusion limit, it remains tax-free until sold by the recipient. For 2023, this limit is set at $17,000.

CoinMarketCap, a popular resource, provides real-time data on cryptocurrency numbers, exchanges, and total market capitalization. By October 2023, the market had over 8,900 varieties to choose from, making the decision more challenging than ever.

Unless you have a specific preference or the recipient has one, it might be wise to opt for mainstream and well-known cryptocurrency assets. Given the volatile nature of prices, it’s crucial to remain level-headed, steering clear of impulsive investments.

Crypto Exchanges

Gifting through a cryptocurrency exchange is another alternative. While you can hold it on the purchase platform, it’s recommended to transfer it offline to avoid risks of hacking or theft.

Hardware Wallets

A more protected storage option is the hardware wallet. These wallets resemble USB devices and are praised in the industry for their security features, such as being waterproof and virus-proof, thereby securing your private keys.

The offline nature of these wallets makes them less susceptible to hacking compared to digital devices like computers or smartphones. With various options in the market, you can purchase them easily based on the features you desire.

Paper Wallets

For an economical offline storage solution, consider paper wallets. By visiting websites that generate random keys, you can create a paper containing the vital codes needed for crypto transactions. Although cost-effective, this method is temporary and prone to damage or loss, necessitating transfer to a more durable storage option like a hardware wallet.

After making and printing the paper wallet, treat it with care. Given how easily they can be damaged or misplaced, it’s advisable to use them temporarily until you can upgrade to a hardware wallet.

Gift Cards

Purchase a cryptocurrency gift card from reputable websites. Check reviews to ensure trustworthiness, select your desired gift amount, and finalize the purchase.

After the transaction, you’ll receive a gift card equal to the deposited amount. The recipient can redeem it by entering the card details on the same website, similar to typical retailer gift cards.

Physical Coins

For a sophisticated touch, consider gifting physical coins containing the cryptocurrency key. Often adorned with a holographic sticker, these custom-printed coins offer a tangible aspect, though they’re primarily decorative or temporary solutions.

Once given, the cryptocurrency should be transferred using the keys, ushering in potential long-term gains post-sale. The recipient would only alert tax authorities if they sell the asset. Depending on the sale, a profit, calculated by the difference between buying and selling price, is subject to capital gains tax.

Important

Bitcoin’s fluctuating worth often exceeds the average budget. Remember, purchasing a whole Bitcoin isn’t necessary; buying fractions is a common practice.

Tip

Given the rapid value shifts crypto can experience, document both the cost at purchase and its value at transfer time. This information is crucial for the recipient to accurately assess any tax implications. Should the asset decrease in value upon sale, certain tax deductions can be claimed up to $3,000 for joint filers and $1,500 for separate filers.

Yes, it’s entirely possible to gift cryptocurrency. You may purchase a gift card from online retailers or transfer crypto directly via a registered exchange to the beneficiary’s wallet address.

Sending digital currencies typically involves logging into the wallet or account where they’re held and transferring the desired amount to the recipient’s wallet address.

Purchasing a hardware wallet is one of the safest methods for gifting a crypto wallet. These small, virus-proof devices are highly esteemed for cryptocurrency storage.

Presenting cryptocurrency as a gift is a distinguishable way to introduce someone to this modern currency, offering potential appreciation in value. Yet, recipients must grasp how to access, store, utilize, and consider any taxation implications. If they’re newcomers to crypto, guiding them with operational and tax-related advice is recommended.

The opinions, analyses, and comments offered here serve informational purposes. As of this article’s publication date, the author holds no cryptocurrency.