The Ultimate Guide to Giving Cryptocurrency as a Gift

Fintech nerds no longer have exclusive access to cryptocurrency. Even those not particularly tech-savvy have heard of cryptocurrencies because of their erratic price fluctuations and value increases, which have made headlines almost everywhere in the world.

Diverse viewpoints exist on whether or not to invest in this asset class. Numerous experts caution that because virtual currencies like Bitcoin will never become widely used, they are overvalued and eventually lose their value. Others hold a more positive perspective and assert that cryptocurrencies are the future wave. They contend that they should be at the top of our shopping lists because those who purchase them now could still make a fortune.

Giving Cryptocurrency as a Gift in 2023

Regardless of your position on the issue, it is impossible to discount the idea that cryptocurrencies make good presents ultimately. Yes, they might quickly lose their value. However, most people concur that cryptocurrencies are fascinating and becoming more and more relevant.

Digital assets can now be used to make purchases and settle debts because an increasing number of e-commerce businesses now accept them as a form of payment. You have a gift that may be useful in many situations if you factor in the possibility that it will be worth significantly more in a few years.

Which Cryptocurrency Is a Good Gift Option in 2023?

At the top of its website, CoinMarketCap keeps track of the number of cryptocurrencies, exchanges, and total market capitalization. With over 22,400 cryptocurrencies available as of January 2023, selecting one is more complicated than ever.
Choose one of the more popular, well-known options, such as Bitcoin, Ethereum, or Solana, unless you or the recipient of the gift have something specific in mind. In recent years, there has been an influx of new, less expensive entrants. However, whether they will achieve the same popularity and longevity as the more established coins is still being determined.

Bitcoin’s value is prone to swings that are usually beyond most people’s means. However, you are not required to purchase a full Bitcoin; fractions of the coin are usually bought.
As high-risk investments, cryptocurrencies must be carefully considered before being purchased. Study the coins that most appeal to you, consider their potential, and see if it is reflected in the price. Given that this is a gift, it would be wise to consider what the recipient might desire.

Investments in cryptocurrencies are not secure. Prices can change drastically daily, so it’s critical to maintain composure and avoid rash purchases and panicked sales.

Advice on Giving Cryptocurrencies

Select the Cryptocurrency Transfer Method

Cryptocurrencies are now much easier to purchase due to their rising popularity and, partly, their speculative nature. Using a giving feature on a well-known bitcoin exchange, investing tool, or peer-to-peer payment app is the easiest technique. As an alternative, you can transfer cryptocurrency directly from your wallet to theirs, construct a wallet just for them, and fund it. Here are a few typical ways these digital assets can be given as gifts.

Credit Cards

Numerous websites offer gift cards for cryptocurrencies. Find a company that seems reliable, ideally with positive reviews, and offers what you want, then decide on the gift amount and complete the transaction.

You’ll receive a gift card in the amount of your deposit once the payment has been made. The recipient can redeem the gift by going to the same website and entering the information shown on the card, much like how regular retailer gift cards operate.

Bitcoin exchanges

Giving cryptocurrency via an exchange is an additional choice. If you still need to become an investor in cryptocurrencies, you must first select an exchange, create an account, and select a payment option. Once everything is up and running, sending the gift recipient’s digital currency purchases to their wallet address will be simple.

Storing digital currency

Once you’ve purchased the gift, you’ll need to find a secure location to keep it. Although it’s generally advised to move it offline to a location where it cannot be hacked and stolen, you can keep it on the platform where it was purchased.

Banana Wallets

Paper wallets are the most affordable offline cryptocurrency storage solution. Simply writing your critical codes on paper can serve as a paper wallet. However, you can make one by going to a website that randomly generates keys and associated QR codes. A piece of paper is produced as a result, on which all the data you require is printed to access your cryptocurrencies and enable transactions.

After designing and printing a paper wallet, you must not misplace or harm it. It’s best to use this as a temporary solution until you can transfer the keys to a hardware wallet because paper wallets are easily lost or damaged.

Device Wallets

A hardware wallet is a more secure storage option. In essence, hardware crypto wallets are USB drive gadgets. They are regarded by many in the industry as the best location to ensure that your private keys are safe and secure because they are compact, waterproof, virus-proof, and trim.

These wallets can be purchased quickly, with varying prices depending on the features they offer, and are offline, making them harder to hack than a computer or smartphone.

Actual Coins

Purchase or make physical coins with the key printed if you want the gift to be a little fancier. Some people use a holographic sticker with the key printed on the back. Because they are made to order using metal or plastic and a three-dimensional printer, these coins can be pretty impressive.

Since physical coins are less secure than other storage options, they should only be used as a novelty or a short-term fix. Once given, the gift should be destroyed unless it is printed on a precious metal, in which case the keys should be used to move the cryptocurrency to a cold storage medium.

Assist the recipient in obtaining and storing cryptocurrency

When you give someone cryptocurrency using an app, they may need to create an account on the platform and provide identification verification before they can claim the gift.

Although it can be a rather easy process, you might want to give them some of your time and teach them around the app as well. If the recipient doesn’t claim the gift within 14 to 30 days, the platform may refund it to you.

If you’re giving someone a wallet with a lot of money in it, be careful to emphasize how crucial it is to keep the recovery phrase secret and safe. Anyone who knows that phrase has access to and control over the wallet’s money.

How Are Gifts of Cryptocurrency Taxed?

Giving loved ones cryptocurrency is typically not taxable. The Internal Revenue Service (IRS) only needs to be notified when the recipient eventually sells the asset. A capital gain or loss is realized unless the transfer exceeds the gift tax allowance.

A short-term capital gain, taxed as ordinary income, will have been made if the recipient sells the gift for a profit within a year. After that, it becomes a long-term gain and is subject to lower capital gains taxes.

The amount you, the donor, paid will determine how much was gained. In other words, if a coin was purchased for $100 and sold for $500 five years later, the gift recipient may be subject to taxation on the profits if they meet the other capital gains requirements.

Make sure to note both the price you paid for the gift and its value at the time it was transferred. If the recipient doesn’t have this information, they’ll have to use the original cost basis, increasing their tax liability.

Losses operate slightly differently and can be deducted by the investor on their tax return. Only when the asset is sold for less than its original cost and fair market value at the time of gifting is a capital loss recorded. When filing jointly, filers may deduct up to $3,000 for capital losses; those filing separately may each deduct $1,500.

Can I Give Bitcoin as a Gift?

Yes. A select few online merchants sell cryptocurrency gift cards. You can go the more conventional route by purchasing cryptocurrency on a licensed exchange and sending the funds to the recipient’s wallet address.

How Can You Send Someone Cryptocurrency?

Frequently, sending cryptocurrencies only requires that you log into the account where you store them, select the desired amount, and send it to the recipient’s wallet address.

How Can I Give Someone a Crypto Wallet?

The best choice is to purchase a hardware wallet. These easily accessible USB drive devices are considered the safest way to store cryptocurrencies because they are compact, waterproof, virus-proof, and small.

Disclaimer: This article does not constitute a recommendation by Investopedia or the author to invest in cryptocurrencies or other Initial Coin Offerings (“ICOs”). Investing in cryptocurrencies and other ICOs is very risky and speculative. Before making any financial decisions, it is always advisable to seek the advice of a qualified professional because every person’s situation is different. Investopedia makes no guarantees or representations regarding the timeliness or accuracy of the information provided here.