Bitcoin and Cryptocurrencies

Moneydance can be set up to track cryptocurrencies, such as Bitcoin.

At the moment, Moneydance cannot automatically update cryptocurrency exchange rates with its source for securities and currencies. This is because cryptocurrency markets are also fairly decentralized and volatile, producing different values on different exchanges.

However, you can set up cryptocurrencies manually, and update their values manually at any frequency you would like.
 

There are two general options for tracking cryptocurrencies in Moneydance -

  • Setting them up as a currency
  • Or setting them up as a security in an investment account.

Due to the somewhat ambiguous nature of cryptocurrencies, there is no one right way to do this.

Cryptocurrencies as a Currency -

This is perhaps most intuitive, since most cryptocurrencies of course have put themselves forth as actual currencies.

Advantages -

  • You can track and make purchases with your cryptocurrencies just as any other currency in Moneydance.
  • It's easy to see the value of your cryptocurrencies relative to each other and state-issued currencies.

Disadvantages -

  • You can't use most of Moneydance's investment reporting tools for currencies.
     
     

To create a cryptocurrency as a currency, create the currency as you would any other currency.
 

After creating the currency, you should create an Asset account to hold your cryptocurrencies.

Since an account must be associated with a specific currency, you will have to repeat this step and create a new Asset account for each cryptocurrency.

For organizational purposes, you may want to create all of these new accounts as sub-accounts of one larger cryptocurrency asset account.

Or you may wish to organize them by the online service or 'wallet' that holds the currencies.
 
 

Once your accounts are set up, you can enter your purchases of cryptocurrencies as a transfer transaction from your bank account (in normal currency) to your asset account (in cryptocurrency).

This same process will work for sending funds in the other direction, or between cryptocurrencies themselves if you make a direct exchange.

You may need to manually enter the exact rate of exchange for these transactions.
 
 

PLEASE NOTE that the Quotes and Exchange Rates extension will likely return an error for your cryptocurrency.

If you don't see an error, make sure that the currency code you have given the cryptocurrency does not match an existing security or currency. If it matches, you will need to choose a slightly different ticker symbol to make sure you don't pull data from a different security or currency into your cryptocurrency.
 

Cryptocurrencies as a Security -

This is somewhat less intuitive, however in practice may be much closer to how most people are actually using cryptocurrencies: not as a currency to exchange for goods and services, but as an asset to buy with the expectation it will increase in value, similar to a standard security on a stock exchange.

It also seems like various jurisdictions are moving towards treating cryptocurrencies more like a security than a currency for regulatory and tax purposes.

That being said, this is in flux and varies based on your country, so you should consult with your tax professional.

Advantages:

  • You can use most of Moneydance's investment reporting tools, such as tracking capital gains.
  • This method likely mimics how most people are buying and holding cryptocurrencies through one or two exchanges, which can be set up here as separate investment accounts.

Disadvantages:

  • It can be cumbersome to use cryptocurrencies as currencies in this setup, as one would have to 'sell' the cryptocurrency first, and then make the corresponding purchase.
     
     

For this method, first decide how you want to organize your cryptocurrency accounts.

This is important because it will be difficult to move securities between investment accounts later without using the buy/sell functions, (which will interfere with tracking your cost basis).

Create the Investment accounts you want for this purpose.

Options could include putting all of your cryptocurrencies in one investment account (regardless of how they are actually held).
Or you could create a different account for each online trading site or wallet you use.
 
 

Next, create a security for each type of cryptocurrency you wish to use.

Be sure to specify the correct number of decimal places for the security in this initial setup; it's common for cryptocurrencies to use eight or more decimal places.
 

When assigning the security to the investment account, you may also want to create and use a custom subtype such as "cryptocurrencies."
This is optional, but will allow this subtype to be displayed in certain places in the program, such as your Asset Allocation graph and report, allowing you to see the percentage of this type of asset.
 
 

After creating and assigning your securities, enter your initial holdings.

Then you can update your cryptocurrency prices. You will likely have to do this manually, although it may be possible to find an online source that can export your prices into a compatible CSV file.
 

To make a purchase for goods and services with your cryptocurrencies in this method, it will first be necessary to sell the cryptocurrency to convert it into your standard currency. Then create another transaction of the purchase with that amount of currency in the bank register of your investment account.
 
 

PLEASE NOTE that the Quotes and Exchange Rates extension will likely return an error for your cryptocurrency.

If you don't see an error, make sure that the currency code you have given the cryptocurrency does not match an existing security or currency. If it matches, you will need to choose a slightly different ticker symbol to make sure you don't pull data from a different security or currency into your cryptocurrency.
 

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