What is crypto? Explained simply
Crypto is the umbrella term for thousands of digital currencies. Here's what sets them apart, how to invest, and what to consider for taxes in Switzerland.
What is crypto?
Cryptocurrencies are digital units of payment or value based on a blockchain, a public, decentrally run ledger. They work without banks or central banks. "Crypto" is an umbrella term: it covers thousands of different projects with very different purposes.
How does crypto work?
Behind the term crypto hide very different projects with different goals: crypto → many different cryptocurrencies.
Bitcoin is seen as a digital payment method and store of value, Ethereum additionally enables programmable contracts ("smart contracts"), stablecoins are pegged to a regular currency like the dollar to stay stable in value, and altcoins is the term for all remaining cryptocurrencies. More on the best-known one on the page What is Bitcoin?
Why do investors buy crypto?
| Benefit | Explanation |
|---|---|
| Potential | High possible appreciation in a still-young technology |
| Decentralization | Independent of any single bank or state |
| Tradability | Tradable around the clock, including weekends |
| Easy access | Entry possible with small amounts |
What risks do cryptocurrencies carry?
- Price swings: Noticeably larger than typically seen with stocks or ETFs.
- Risk of total loss: Individual projects can become worthless entirely.
- Regulatory uncertainty: Laws and rules can change.
- Security risks: Platform hacks or loss of your own wallet.
- No deposit insurance: Unlike bank balances, not protected by the state.
Bitcoin or other cryptocurrencies?
Bitcoin is by far the best-known and longest-running cryptocurrency. How it works in detail, including the blockchain and mining, is explained on the page What is Bitcoin?
Crypto taxes in Switzerland
The holding on 31 December counts towards wealth tax, capital gains are tax-free for private investors. How to enter crypto in your tax return is shown step by step on the page Crypto tax return.
Which platform is right for you?
Fees, supervision and the range of coins on offer differ noticeably between providers. The crypto platform comparison puts the common providers side by side.
How could a crypto portfolio develop?
Enter your crypto positions in the Depotly financial cockpit and see how your wealth could develop over the coming years.
Keep an eye on your wealth Enter your crypto positions in the financial cockpit and see how your portfolio could develop.Further reading: What is Bitcoin?, Crypto and taxes in Switzerland and Crypto platform comparison.