Eric Adams confirms that he will get paid in cryptocurrency. Should you do the same?
the main points
- New York Mayor Eric Adams will take his first three Bitcoin salaries and call for dip buying.
- Getting paid for crypto can be complicated in terms of tax, risk, legality, and volatility.
- Buying on the dip is not the right strategy for every investor.
New York Mayor Eric Adams not only wants his first three Bitcoin (BTC) salaries, but is also asking people to buy dips. Bitcoin dropped to its lowest level since late September yesterday, according to CoinMarketCap data. Speaking to CNBC, Adams said, “Sometimes the best time to buy is when things are down, so when you come back up, you make a big profit.”
The newly elected mayor wants to make New York a more attractive crypto destination. But it may stop working.
For a start, getting paid with bitcoin is not as simple as it might seem. New York is not set up to pay its employees or officials with anything other than US dollars. Apparently, Adams – who has not yet received his first salary – will need to use a crypto exchange to transfer his salary.
In addition, New York has some of the strictest crypto systems in the US crypto exchanges, which require a BitLicense to operate in New York, which can be very difficult to obtain. And the New York attorney general’s office has taken a hard line on crypto enforcement, promising to crack down hard on bad actors.
Adams is not the only mayor who wants to get paid in cryptocurrency. The mayor of Miami, Francis Suarez, made similar comments as part of his mission to make Miami the capital of crypto.
Should you ask for bitcoins?
Several prominent sports personalities have joined Suarez and Adams in asking for crypto salaries. However, it’s not something you can easily get into – especially for city and state salaries. In fact, it is not clear whether the city salaries or not can Pay any of the mayor with bitcoin.
Aside from the legal aspects, accepting a Bitcoin salary means being prepared for volatility. Your salary this month could be 20% less than it was last month. Since you probably don’t pay for rent, groceries, or other daily costs in crypto, this can be a problem.
Then there are taxes. The IRS treats cryptocurrency as property, which is taxed differently than currency. You will have to keep track of every crypto transaction and possibly pay capital gains tax when selling or spending your assets. Let’s say you get your paycheck in Bitcoin and then use some BTC to buy a meal. That would be a taxable event.
You also need to consider the risks. We don’t know what will happen to the cryptocurrency industry in the coming years. It may go from strength to strength and produce incredible returns. But it might not be. You need to think about what percentage of your salary you want to put in the high-risk asset class.
How about buying a dip – is it a good idea?
With a volatile investment like cryptocurrency, buying dips can make sense. We all like to buy low and sell high, but that is often easier said than done.
One of the challenges is timing the dip and knowing how deep it can go – or, conversely, anticipating the spikes. For example, if you bought Bitcoin yesterday, there are no guarantees that the price will not drop further (as it has already happened). Or you may end up always waiting for a drop that never comes and not investing at all.
Some people use a dollar cost averaging investment strategy to mitigate this risk. This means buying a small amount at regular intervals – for example, you might buy $100 worth of bitcoin at the beginning of each month. This is a way to deal with cryptocurrency fluctuations without spending all of your energy trying to time the market. The cryptocurrency market is very new, so we don’t have a lot of data to work with, but it’s an approach that has worked well for investors new to the stock market.
Another risk is that you are spending money that you did not plan to invest. It’s a bit like going to the grocery store and buying things you don’t need just because they’re on sale. The idea of buying cryptocurrency at a discount can blind people and thus rush into investment decisions.
On the other hand, if you are old at investing in cryptocurrencies and have confidence in Bitcoin for the long term, these dips could be a great opportunity to add to your portfolio. Especially if you have already done your research and know which cryptocurrency you want to buy. You may have a watchlist of cryptocurrencies and some cash that you’ve been keeping in reserve, so you’re ready to pounce when prices drop.
If you are considering buying back, make sure to buy the cryptocurrencies that you have researched and already plan to buy and hold for the long term. Don’t be tempted to spend money that you need to achieve other financial goals, especially money that you need in the short term. If the price keeps dropping, or stays low for an extended period of time, you don’t have to sell at a loss.
As with any investment, there are no guaranteed returns. Take your time, understand the risks, and make sure it’s the right decision for your financial situation.
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