Cryptocurrency has proven to be a fantastic investment for many. As an example, the staggering rise in Bitcoin’s worth and popularity can be felt through the entire crypto market, and it’s no surprise that thousands of investors are wondering what to do next. Do they hang onto their assets to make a larger gain in the future, or is now the right time to cash in on their investments?
A significant part of any crypto investment strategy should include an exit plan. Whether you invested years ago in time for the boom, or whether you’re only just starting to trade in cryptocurrencies, knowing how and when to exit the market is essential.
Having a way out can help you to maximise gains and minimise losses. In this article, you will discover how to make the most of your cryptocurrency investments when you decide to sell.
Why Should You Consider Exiting Crypto?
Cryptocurrencies have reached an all-time high in terms of market capitalisation. At the time of writing, the market cap stands at $1.5 trillion USD (for the most up to date value, please click here). For anyone who has held onto their coins for many years, the market growth represents a tremendous return on investment.
Even recent investors who have purchased cryptocurrencies at the end of 2020 have seen a significant ROI. With such high gains available, it’s worth contemplating whether now is the time to cash out and reinvest in another coin, or whether to bow out of crypto altogether and enjoy the profits.
Predicting how the cryptomarket will rise and fall successfully every time is not an easy thing to do. In fact, there’s probably no one on earth who has managed to do this. Not all currencies ride the wave and grow continuously, and you should always keep the idea of selling in your mind to ensure you don’t lose your investment capital.
When you come up with your crypto investment strategy, think about how much of a risk you’re willing to take. If you feel comfortable selling for a 50% profit, then that could be the best route for you. On the other hand, you might be more daring and decide to wait and sell at a 100% (return on investments that are common in the world of cryptocurrencies) profit or higher.
Of course, the market could go the other way entirely. Then, you would have to consider if you should cut your losses. Would you be comfortable watching the value of your coin drop on the chance it might spike in price again?
The best investors always have a way out, and you should have a plan in place for all eventualities.
Are Your Profits From Selling Cryptocurrency Taxed?
In most countries, crypto isn’t considered as a currency. It is often seen as a personal investment asset in the same way as gold would. When putting together your crypto investment strategy, remember you could actually end up making a loss due to tax.
If you’re selling your crypto assets for a higher price than what you paid for them, then it’s a capital gain. There are a lot of countries that will tax you for making a profit — such as the United Kingdom and the USA — but every country is different, and there are nations that will either tax you a minimal amount or won’t tax you at all.
Which Countries Do Not Tax Cryptocurrency gains?
In Germany, once the asset has been in your possession for over a year, it is exempt from capital gains. Bitcoins held in a business’s name, however, will need to pay taxes on gains made from Bitcoin through corporate income tax.
Companies in Singapore that trade cryptocurrency as part of their business are taxed on profits as if they were income. But, companies and individuals who hold onto cryptocurrency as an investment won’t be taxed, as there is no capital gains tax in Singapore.
A neighbouring country to Singapore, Malaysia is another nation that doesn’t have capital gains tax. This means citizens can freely trade cryptocurrency without having to factor in a tax payment.
Belarus changed its law in 2018 which means crypto assets are free from a range of different taxes. They are considered to be personal investments, and cannot be taxed until 2023.
Switzerland is one of the most crypto-friendly countries in the world. Crypto Valley, the Ethereum Foundation and the Libra Association are all headquartered in Switzerland.
While professional traders are subject to income tax, private investors buying crypto assets with their private assets are exempt from paying capital gains tax on their profits.
How Naray Law Can Help With Your Crypto Investment Strategy Exit Plan
Crypto assets are still a relatively new concept, and finding the right legal representative to help you navigate tax laws can be difficult. However, Naray Law is a firm that specialises in tax matters related to crypto assets and Bitcoin.
If you’re struggling to come up with the exit plan for your crypto investment strategy, we can investigate, with our partners, the applicable tax rules in your country and suggest the best course of action.
As mentioned earlier, Switzerland is one of the most crypto-friendly countries in the world. Private investors who are looking to make the best returns on their cryptocurrency investments can benefit greatly from our nation’s tax advantages. We can assist you in taking up residence in Switzerland to maximise the profits from your sales.
For more information on how we can help, make sure to get in touch.