Crypto Losses As Tax Write Offs? What Bitcoin's Historical Sell - Offs Teach Us - Crypto Breakdown January 24, 2022

Episode Summary:

Today I talk about historical sell- off's in Bitcoin and what they teach about where Bitcoin may be headed next. I also talk about how to mitigate your crypto losses and some tips on using crypto losses as tax write-offs.

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Hosts:

Joe Dewitt Follow at: https://twitter.com/metabitz

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Hey, everybody happy Monday. Hope you had a nice weekend. My name is Joe Dewitt, and this is the crypto breakdown considering, and has not been the greatest week for crypto. We're going to talk a bit about how to manage your crypto losses and some historical selloffs. Over at previous crypto cycles. We will take a look at Bitcoin because it is clearly the market indicator.

So in 2013 price surge up to about $1,000, which quickly fell off into a consolidation period in February. And that consolidation was about years up into March of 2017, where we started entering the bullish rally, which got us up to an all time high. I have about 19,500 and that price quickly fell off into a consolidation period, which would be on the consolidation of the 20 18, 20, 19 and 2020, then right after the COVID crash in March of 2020 Bitcoin started to surge after the following months, which reached an all-time high of 64,000.

Now, after this all-time high of 64,000 Bitcoin fell off, and then it actually climbed again and. To another all-time high of 69,000. And now we're at the point where we have fallen into a consolidation period. And if history does repeat itself, it may look like this could be a year long consolidation, period.

If not years, the next following weeks are going to be crucial for Bitcoin. As it's going to determine the future of its cycle. It is not for certain that we are in a bear market yet, but historically, after all time highs are reached, there is that. Went into a consolidation phase and Bitcoin has just reached an all time high and it started to fall off.

So historically we would think that this could be a consolidation period. Although if Bitcoin does fall below its 29,000 level of support, then I do think it will be safe to say now we are entering a. Fair market. So the first part about managing your crypto losses, I would like to talk about would be to set clear goals.

Now, what I mean by setting clear goals is to essentially come up with a trading plan before you start your position. So whether you're going to be doing a Swain trade, whether you're going to be holding for the long-term as well as assessing your risk tolerance. So I like to say never invest more than you can afford to lose.

So this is something you will have to set for yourself on how much you are comfortable losing. Because at the end of the day, we are investing in very volatile assets. And we do not know when price can fall as drastically as it did. So having a clear goal and trading strategy is very. And just to make sure to follow it is also just as important.

Another aspect of managing your crypto losses. I would like to talk about would be how you can actually use your crypto losses as a tax write-off. So you can offset your capital gains with the losses from crypto. Another aspect I want to talk about with managing your crypto losses is how you can actually use your crypto loss as a tackle.

So you can offset your capital gains as well as $3,000 of personal income with your crypto. Losses does help if you are in a sticky situation or if you have made a bit of income and you're looking to offset that with some of these losses that is huge to make that crypto hit not as bad as it could have been.

And finally, the last little piece I want to talk about managing your losses would be don't fall prey, a phone. Which is fear of missing out. This is one of the bigger phenomenons and the space, and it is just the idea of groups of people having the fear of missing a project. So they essentially go all in minimal research, hoping that this is going to be the next 10 X coin.

It's just a really sticky situation. And I would recommend absolutely do not do that. If you were. Feeling that you may have missed out on something and that you ended that it may be too late for you to invest, take it with a grain of salt, step back, do some research, and actually think about why you are feeling that way.

And after your research has concluded, if it truly is too late for you to enter that project, then just keep an eye out for the next one. Never ever force a position. When you force positions is one, you are more bound to lose. And one last tip would be to  diversify. I always say this.

Always make sure to diversify your positions. If you want to invest $5,000 into crypto, do not invest $5,000 into Bitcoin. Invest a thousand. Then you can invest a thousand and to another. 502, another 502 another and so on and so forth. Five diversifying you're mitigating the losses that you would be receiving on a certain coin.

So it is pretty self-explanatory, although it is such a huge aspect of trading that many people overlook that really helps offset some of your losses. So definitely keep that in mind and that's all the time we have for today. Guys. Thank you so much for tuning in. You can follow, subscribe to our podcast, which will all be in the description.

Have a great day