As the battle of the bitcoin and altcoin maximalists continues, the marketcaps are shifting and trying to find their perfect balance. Many bitcoiners seek for the perfect opportunity to increase their bitcoin holdings. With bitcoin rising above 40.000 US dollar and the bitcoin dominance trying to overcome its final resistance, many traders as well as investors are waiting for the perfect storm. Most people may already know what we’re referring to. Maybe now is the perfect time for the next #ALTSEASON.
As the past has shown us there could be one or two huge altcoin cycles in front of us.
Is it the right time to shift your balances from bitcoin to altcoins and grasp the opportunity? We don’t know that, but we know the shift to altcoins might lead to enormous risks from the tax perspective. Exchanging bitcoin for an altcoin makes you realize profit/loss and you need to pay tax on that. If your altcoins suffer a loss, you will have much less substance or need to sell at an unfavourable price in case you need cash. And IRS will be demanding cash from you for the previously realized bitcoin gains. This happened to many traders in the aftermath of the 2017 and in some cases their tax liability was larger than their whole crypto porfolio.
The most important things are to track your potential tax liability and your portfolio development. With the tightening regulatory framework around the world and the RIPPLE lawsuit in the US the risks are real and you need to track all your crypto transactions to prevent potential damage in the future.
How to react to this situation correctly? Our answer to this is to check your tax liability upfront, before the IRS or another tax regualtion authority does it for you. In order to keep track of all your transactions and don’t get rekt by the IRS. Be smart and use crypto tax software that lets you make right decisions and provides maximum compliance. With Blockpits Cryptotax Tool you can check your taxable profits and how much you would have to pay in taxes if you cash out now. This gives you the opportunity to get the most of the bull market and avoid the tax traps.