We haven’t talked about cryptocurrency much lately. Admittedly, I am like everyone else who gets excited when the markets are going sky-high but quickly loses interest when markets are struggling.
However, In times like these, regardless of asset class, it is critically important to stay rational. Let’s take bitcoin as an example. As I write this Bitcoin is sitting just under $20K. It could absolutely go lower.
But…for those of us who believe bitcoin is here to stay, does it matter? If you believe bitcoin is here to stay and that there is a finite amount of bitcoin that will ever be in existence, the price simply must go up over time as more people buy it and the market capitalization increases.
This is an extraordinarily volatile market. But if you look at bitcoin price history, the trend is clearly UP. If that’s the case, and you are a long-term holder/believer of bitcoin, you should be rejoicing about bitcoin prices today and strongly consider buying.
This is a very difficult thing to do because ultimately we are wired to run away from danger (falling prices) and to run to pleasure (euphoric markets). But you have to rise above those instinctual impulses and be rational. That’s how the best investors in the world, like Warren Buffet, differentiate themselves from the masses.
Ok…so enough pep talk. Let’s be practical. We are in a bear market. Many of us have lost significant value to our portfolios. The good news is that the tax rules for cryptocurrency are favorable—especially when it comes to locking in losses.
As we wait for the bear market to end, it is a good time to make sure that we are aware of accounting principles and tax law as it relates to cryptocurrency. This will make it much easier when your portfolio explodes again!
For that purpose, this week’s Wealth Formula Podcast Features a CPA who specializes in cryptocurrency. Listen NOW!
Micah Fraim is a CPA living in Roanoke, VA. His expertise has been featured by Forbes, TIME, MSN, Nasdaq, Fox Business, Yahoo! Finance, and other major publications. Micah is a business expert in addition to a tax guru. This allows him to bring a unique perspective to his clients – advising them on what is best for their business overall, not just from a tax perspective.