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Many people in crypto have been waiting for the bull run to come where they can get the huge gain that they dream of, and it seems the time has finally arrived. However, not many realize that managing huge gains in crypto is a whole lot of problem in itself. Cashing out huge crypto gains could be so tricky and problematic. Hence, creating a cashing out strategy is very important just like the investment.
With the bear market now behind us, we've entered a new bull cycle that could make huge gains for a lot of people. But making big gains and cashing are two different things entirely than people realize. If not done carefully and strategically, most people are bound to encounter problems at cashing out points.
What is your selling plan?
The first issue to deal with on your cashing out plan is the plan on the best way to sell, when and how to sell, and where to sell.
Many would look at it as just a simple case of transferring crypto to an exchange and setting it up for sale, and then you click on the sell button and viola, everything is sold in one trade. It's more than that; You need a selling plan.
Do you want to cash out all your coins at once? Or take out just your invested principal? How about dollars average, will that be your best cash out option? At what percentage increments would you sell? How much are you leaving behind, and how much are you taking out? Where and when do you make your trading?
This may be different for everyone, since some people are experts in the crypto market. However, there's a need to look at it a little, especially for those who are new to crypto, than just waiting for the market to reach the top with no specific plan in place, thereby leading to panic selling when the tide turns and crashing down takes its turn.
Know that there is a cost of selling
Selling crypto costs money like everything else. Even if you are selling your gains, you have some cost to bear. This may not cost you much, but you need to pay attention to those exchange fees. There will be trading and transaction fees for transfer and Fiat withdrawal to your bank account.
These trading fees can vary depending on the type of crypto. Some coins may have near to $0 fees, but coins like Bitcoin and Ethereum could have more significant increase fees especially when their network looks congested.
The percentage fee is usually the only amount that the exchange charges. Therefore, you cannot sell everything at once and expect a discount; rather, you have to break it down into several sales. This means that if you do many trades in a month then the fees are lower for some exchanges among other things.
If you are going to cash out a huge amount to a bank account, some banks charge higher transfer fees for when it's from a crypto exchange. You will need to use a peer to peer service in the exchange to mitigate against those fees. Check for those fees before doing anything.
Security Issues
When dealing with large amounts of money and transactions, security must be considered. You would take this advice as seriously when you were going to deposit thousands of dollars cash at a bank. And certainly not a middle-of-the-night visit to an ATM along the street.
When cashing out your crypto, go to where you trust the most or open an account in a trusted exchange instead. And you'll want to take all the precautions for that level of money, and do small test transactions, double checking the address, and making sure you use the correct exchange link. Moreover, setup two factor authentication (2FA), and some extra limits for cashing out your money.
know about Tax implication
It is worth emphasizing that there are tax implications for people who make significant amounts of money. Perhaps, major gains can throw your taxes out of whack.
Maybe a good suggestion would be not to wait until 2025 and sell everything when you think the bull run will go into full mania mode. Some gains should be cashed in by 2024 so as to divide them between two fiscal years.
You must also consider other profits and other losses. Hence, it’s going to vary from person to person and depend on other things in the year. With crypto, there are still no wash sale rules (to harvest losses more easily). There will probably be lots of volatility this year that will enable such opportunities.
However, don’t overthink this either because you end up missing out on gains just because you wanted to save $5 on taxes. Therefore, you do not want to do something penny wise and pound foolish
Other rules, exceptions and so on in executing big deals.
For those living in countries where the IRS rule strongly holds, you are still in luck because the new IRS rule regarding $10K crypto transactions has been postponed and will not be implemented this year. Besides, it's business-oriented anyway.
However, depending on your jurisdiction you may have laws, tax regulations or red flags raised concerning large transfers into your bank account. Bank secrecy Art (BSA) or anti money laundering regulations resist transactions of over $10 to bank accounts.
But I know if by any chance tens of thousands dollars appeared on your bank account all at once, possibly, somewhere there might be some flag raised.
Other unorthodox ways to cash out your crypto
Cryptocurrency is still a currency. Therefore, an exchange is not the only way to cash out your gains.
There are plenty of places online that accept crypto with even more choices today for real world merchants. Platforms like BitPay, Paypal, Flexxa among others are notable places to buy things with crypto. One thing to bear in mind though, is that some of these are not direct P2P payments, and may have additional fees and charges.
With a gold bug you can pay in crypto to buy gold at major online metals sellers, who actually give you a discount if you use crypto as opposed to paying with credit cards.
Gift cards are another option for using cryptocurrency. Some gaming platforms include this option for withdrawal of earnings.
Some real estate business outlets accept crypto for real estate transactions. However, even where it’s not advertised, you can always inquire about it. An acceptance of cash instead of mortgaging doesn’t matter whether its crypto; some sellers will happily avoid banking institutions or mortgages. They already know how to use it since they already have a wallet for digital currency; they know its benefits and security features; they will receive payment within minutes and confirm their payment has been made once thus knowing that they have been paid.
If you have read through to the end, I am sure you must have learned one or two things from the article. A cash out plan is as important as the investment itself.