Should I Sell My Bitcoin?

Zac McClure
ByZac McClure, MBAReviewed byAlex MilesUpdated on January 14, 2025 · minute read
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  • Bitcoin's volatility can test any investor's patience, but historically it has rewarded those who hold for the long-term. Selling Bitcoin because of short-term market swings could mean missing out on future gains.

  • Short-term versus long-term capital gains taxes can significantly impact your final profit and should be considered before trading.

Should I sell my Bitcoin

You're not alone if you ask yourself whether it's time to sell your Bitcoin. Crypto markets can swing widely, leaving investors uncertain about the best move. Historically, Bitcoin has shown that it can rebound from significant dips to reach new all-time highs, yet there's no guarantee the future will mirror the past.

Your decision will finally hinge on financial objectives and risk tolerance. If you bought Bitcoin anticipating significant growth over the long haul, selling during temporary market lows may not align with your original plan.

On the other hand, if you have more immediate financial needs or are worried about ongoing volatility, it might make sense to lock in gains (or limit losses) now.

Disclaimer: Nothing in this guide should be interpreted as financial advice. It's wise to conduct thorough research or consult with a professional before buying or selling crypto.

To help guide your decision, use our free crypto tax calculator.

Pros and cons of selling your Bitcoin

ProsCons
Capture gains: If you believe Bitcoin’s price may dip soon, selling can lock in your profits today.Miss future appreciation: If Bitcoin’s price rises again, you won’t benefit from that upside.
Diversify: Freeing up funds can help you invest in other assets or cover pressing financial obligations.Capital gains taxes: Depending on how long you’ve held your BTC, your tax bill could cut into your real profit.
Reduce risk exposure: Less exposure to a volatile asset can ease financial stress.Opportunity cost: Holding BTC for over a year may qualify you for favorable long-term tax rates.

Scenarios when selling your Bitcoin makes sense

While no one can predict Bitcoin's future price, certain personal or market conditions may point toward selling. Here are a few scenarios to consider:

  • You've reached your target returns: If your investment has hit a set profit that you're satisfied with, and selling could help protect your gains.

  • You have urgent financial needs: Sometimes, life circumstances like medical bills, a new home purchase, or tuition require quick liquidity.

  • You're shifting your risk profile: Selling might offer peace of mind if you prefer a more stable portfolio or want to diversify into other opportunities.

  • Ongoing negative market sentiment: You could decide to reduce your holdings if persistent negative news about regulatory actions or economic factors begin to devalue Bitcoin.

Things to consider before selling your Bitcoin

Before you hit the "sell" button, keep these factors in mind:

  • Long-term vs. short-term tax rates: Holding Bitcoin for more than a year may reduce your capital gains tax rate (in the US), significantly boosting your net profit.

  • Recordkeeping: Every transaction triggers potential tax implications, so maintain accurate records. Even if you sell BTC to buy another cryptocurrency, the IRS still views it as a taxable event.

  • Market conditions: Is Bitcoin's price fluctuating in the short term? Is there a deeper reason, such as economic shifts or significant regulatory changes?

How to sell Bitcoin

Selling your Bitcoin can be straightforward, but do your homework first. Established exchanges such as Coinbase, Gemini, or Binance are often the most convenient. Here's how the process generally works:

  1. Set up or log in to your account: You'll need to verify your identity, so have a valid ID ready.

  2. Transfer your Bitcoin: Move your BTC from your wallet to the exchange's wallet.

  3. Place your sell order: Specify the amount of Bitcoin you wish to sell and confirm the order.

  4. Withdraw your funds: Transfer proceeds to your bank or debit card, mindful of any fees or withdrawal limits.

Taxes when you sell Bitcoin

When contemplating whether or not to sell, keep tax considerations front and center. If your Bitcoin is worth more now than when you bought it, you'll realize a taxable capital gain. If it's worth less, you can claim a capital loss that offsets other capital gains or a portion of ordinary income (in the US).

Learn more about the current tax rates for cryptocurrency.

How will my profits/losses on Bitcoin be taxed

  • Short-term capital gains: If you sell Bitcoin within a year of purchasing it, your profit will likely be taxed at the same rate as your ordinary income.

  • Long-term capital gains: If you hold Bitcoin for more than a year before selling, you'll generally pay a lower tax rate. This can substantially impact the final amount you keep.

You must keep detailed records for every transaction, including purchase dates, purchase amounts, and sale amounts. You'll need them to accurately determine your crypto cost basis and potential capital gains or losses.

Calculate your crypto gains with our free crypto profit calculator.

Unique tax-loss harvesting advantages

For US taxpayers, Bitcoin is classified as property, not a security. This distinction may allow you to sell Bitcoin at a loss, claim that loss on your taxes, and immediately repurchase Bitcoin (often referred to as tax-loss harvesting).

Under current IRS guidance, the wash sale rule (which typically prevents investors from claiming immediate losses on securities sold and purchased back within 30 days) has not been explicitly extended to crypto. However, tax laws can change, so monitoring potential regulatory updates or consulting with a professional is advisable.

Learn more about crypto tax-loss harvesting and wash sale trading in crypto.

Should I sell my Bitcoin FAQs

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Zac McClure
Zac McClureCo-Founder & CEO at TokenTax
Zac co-founded TokenTax after his career in international finance and accounting at JPMorgan, Imprint Capital and Bain. He has worked in more than half-dozen countries and received his MBA from the UPenn Wharton School.
Alex Miles
Reviewed byAlex MilesCo-Founder at TokenTax
Prior to TokenTax, Alex worked as a Product Designer at Dropbox and before that Readmill (acquired by Dropbox). He holds a BS in Digital Information Design - Interactive Media from Winthrop University.

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