Explore this article to make an informed decision on investing in Bitcoin

 Should I sell my Bitcoin?

As a crypto investor, you may prefer to sell or hold. However, you should consider your financial ability, and if you sell, there could be tax implications. In this article, we'll discuss five crucial questions you should ask yourself should I sell my Bitcoin.

Here are the 5 essential things to consider before selling Bitcoin.

What was your reason to buy Bitcoin

Before asking yourself –"should I sell my Bitcoin?", it is wise to remember what initially inspired you to earn BTC, as it may be for long-term appreciation or trading it for short-term profits.

 Should I sell my Bitcoin?-Here are the things to be considered. Take note that Bitcoin functions in a market similar to traditional stocks because it is volatile, unlike a stable economy. That doesn't imply that the stock market isn't risky for many people because, for them, it is a chance to make serious profits in the long term.

Long-term Bitcoin investors who have been patient, for instance, saw the prices fall drastically, after which the price surged greatly or saw significant profits in the past. If you had bought it because you were an avid supporter of Bitcoin valuation and its potential pitfalls in the long term, selling during a crash may be against the original strategy that you believed in.

What is your risk tolerance?

Before asking yourself "should I sell my Bitcoin?", it is a prerequisite for you to consider how much tension you can take before making any investment in the crypto market. Investors must learn to face quick reversals and resolutions, meaning even pros can be shaken.

Indeed, some investors may hold their losses from the fast-dropping stock prices and sell their assets quickly. On the other hand, while it is necessary to make the decision carefully without gazing into the abyss, the rational approach should be grounded in your financial situation.

Remember that Bitcoin's past contains very vivid instances of high volatility and bounce back, followed by growth. This does not mean that it has a never-dying aspect. Analyze your limit no matter what this is. In reality, it should not be higher than the turbulence levels you can tolerate over the short term without risking your ability to meet basic expenses or afford to worry.

How will the profits/losses on Bitcoin be taxed?

It is equally essential to remember that your Bitcoin sale may affect your tax situation and your decisions.

In the case when you sell your BTC, you will have either capital profit or capital loss depending on the movement of the value of your BTC since then.

You can calculate the amount of capital gains or losses you will incur through this formula:

Capital gain = Value at the time of sale – Cost basis

Such a scenario will happen if you pay capital gains tax on your profits, and the BTC value you had initially received has gone up since. You have to consider the amount of money you are going to be left with after you charge income tax on selling the Bitcoin if you are aiming to sell the Bitcoin for a profit.

In case the value of your BTC has decreased compared to what you were given at the beginning, your losses are subject to capital gains for that tax year, and you can include up to $3,000 of income in the next year. If your Bitcoin sales are planned to be at a loss, then you should carefully consider how it will lower your tax bills.

Will you be paying any short or long-term capital gains?

Depending on your Bitcoin holding period, your gains can be considered long-term or short-term capital gains.

For 12 months or less, if you have owned these digital currencies, you have to pay the higher short-term capital gain tax. Not only that but if you've kept your cryptocurrency for more than 12 months, you pay the lower long-term capital gain tax rate.

Some investors opt to keep their BTC stash for 12 months or more to take advantage of their lower tax rate.

Is it possible to leverage Bitcoin tax loss harvesting advantages?

Suppose you are a potential BTC investor, and your position is at a loss. In that case, you will need to know that Bitcoin and other digital currencies have some unique features that give them an edge over traditional stocks for tax loss harvesting purposes.

Concurrently, now the IRS has a wash sale rule that makes a capital gain loss unacceptable if the securities are bought conditionally 30 days before and after a sale from this point. Nevertheless, the IRS's guidance has made crypto coins, such as Bitcoin, property compared to any other security.

Assuming the Internal Revenue Service's guidance today, the rule of wash sale probably does not apply to Bitcoin. The majority of investors choose to realize a loss for their sale and later, get their coins back only several days later.

Some investors don't want to sell their BTC as they know the potential that coin has, but they still need fiat currency just because. It is particularly those investors who apply for cryptocurrency loans hereinafter.

The process is simple: You may receive the needed fiat money as a loan in exchange for your digital money, which is used as collateral. Basically, you'll be paying the loan plus the interest rate monthly.

When should you sell your Bitcoin?

Here are some of the situations you should consider for selling Bitcoin. Nowadays, the value has at least doubled or tripled since when you acquired it.

When your investment reaches an all-time high, you probably need to sell some of it.  As exhilarating as it may be, you can lose hard-earned profits in the blink of an eye on the crypto market. If possible, use some of your earnings to guard against potential future losses, too.

Probably the most essential part of investing in crypto is cutting your losses if necessary. This can be challenging because people who buy cryptocurrencies often have a very high level of passion for the specific cryptocurrency that they choose. That's why it's not a good idea to become excessively dependent on a particular project.

What should you do when you decide to hold or sell your Bitcoin?

If you decide to sell your Bitcoin, you can exchange the coins via platforms like Coinbase, Gemini, and Kraken. While this functionality is convenient for some, you may also have to pay fees on transactions.

How do you manage Bitcoin taxes?

Prior to reporting your Bitcoin taxes after a trade, you must make coherent records of your transactions, including the cost base, the date of acquisition and disposal of Bitcoin, and the price of Bitcoin when you sold it at each trade.

FAQs

When do you need to sell Bitcoin?

Just like stocks, crypto is taxed as long-term gains if you hold it over 12 months. Long-term capital gains have tax deductions lower than short-term gains, which are taxed at the same regular income tax rates. If you are in the eleventh month of owning cryptocurrency, take a two-month break, and that would mean you deserve to sell it a few days after the year-mark threshold.

What will the worth of Bitcoin be in 2050?

Next, we look to 2050, and we assume a 3-year simple growth rate of around 19% using a price in 2020 of Bitcoin to quantify the hypothetical price it would be by 2050. The data shown reveals that dogecoin can grow to a cost of US$5,411,000 in 27 years (2050) and exceed its current growth by +10,980%.

Are there Billionaires who own Bitcoin?

Their number is 16 on the list of the wealthiest billionaires, as calculated by Forbes. Sam Bankman-Fried has not been removed from the list but is number 17 now, much to the dismay of Forbes, which lists the founder of the formerly large crypto platform without his fortune.

Is it possible to become rich with Bitcoin?

Due to its volatility, Bitcoin has created early crypto-millionaires, and you can be one of the new millionaires, too. Throughout its 15-year history, Bitcoin (CRYPTO: People are making lots of money with (BTC) finding. Although the blockchain analytics platform Glassnode tends to demonstrate around 115,000 wallet addresses that store more than $1 million in their possession today.