You’ve hopped on the crypto bandwagon and made a decent profit in bitcoin, now what? As you stare down your gains, wondering what to do next, it can be easy to chase more of the same returns, but financial experts warn that can be risky. With bitcoin’s volatility and the uncertainty of emerging digital assets, the way you manage your profits now can shape your financial security for years to come. Financial experts explain what your next move should be, as well as a few steps to take after that.
Before making any financial moves, experts say the first step after a profitable bitcoin run is protecting what you already earned. This means tightening account security, whether it’s cold storage using a ledger or two-factor authentication and making sure you don’t have custody risk. Then, you should confirm your cost basis, that’s the original amount you paid for the crypto, which determines how much of your profit is taxable, and document gains or losses so you can properly plan next steps. “Too many people just celebrate first and do paperwork later, and that’s not the way to operate,” Morris warned.
You can’t plan for rebalancing or reinvesting when you don’t have clean numbers. Remember, too, that you may not receive 1099s from bitcoin investments at the end of the year. Once you’ve secured your gains, it’s time to get tax savvy. Bitcoin gains might seem like free money, but profits are always taxable, according to Ravi Parikh, CFO and managing director of Parikh Financial.
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