You hopped on the crypto bandwagon and made a decent profit in bitcoin, now what? As you stare down your gains, wondering what to do next, it can be easy to chase more of the same returns, but financial experts warn that can be risky. With bitcoin’s volatility and the uncertainty of emerging digital assets, the way you manage your profits now can shape your financial security for years to come.

Financial experts explain what your next move should be, as well as a few steps to take after that.

Before making any financial moves, experts say the first step after a profitable bitcoin run is protecting what you already earned. Julian B. Morris, CFP and principal at Concierge Wealth Management, said that means tightening account security, “whether it’s cold storage using a ledger or two-factor authentication” and making sure you don’t have “custody risk,” the danger that the exchange or platform holding your crypto could lose it, freeze it or become insolvent.

Then, you should confirm your cost basis, that’s the original amount you paid for the crypto, which determines how much of your profit is taxable, and document gains or losses so you can properly plan next steps. “Too many people just celebrate first and do paperwork later, and that’s not the way to operate,” Morris warned. “You can’t plan [for] rebalancing or reinvesting when you don’t have clean numbers.”

Remember, too, that you may not receive 1099s from bitcoin investments at the end of the year.

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Once you’ve secured your gains, it’s time to get tax savvy. Bitcoin gains might seem like free money, but profits are always taxable, according to Ravi Parikh, CFO and managing director of Parikh Financial. Failing to plan for taxes is one of the most expensive mistakes investors make, with a tax rate between 10% and 37%.

Whether the gain is short-term or long-term determines your rate and may shape whether you should sell now or wait. “If you are diversifying out of bitcoin and you have over $100,000 in gains, you definitely need to work with a CPA and/or CFP professional,” said Jay Zigmont, a CFP and founder of Childfree Trust.

Parikh recommended using a tax-loss harvesting strategy, “where you sell underperforming assets to offset your gains.”

Once you know the tax picture, the next move is deciding how much profit to take off the table. Parikh warned that the biggest mistake is “to hold on for too long, expecting more gains.” A rules-based profit strategy can help preserve wealth and prevent emotional decisions after a big run-up, instead. For example, he said, sell 50% after a major gain, reinvest 25% in other assets and hold on to 25%.”

Bitcoin’s volatility can allow a small initial investment to suddenly dominate your net worth.

“If your crypto investment has done well, it’s likely now a large portion of your portfolio, which makes it a significant risk,” Zigmont said. “Take your profits and run,” rather than staying overly invested in bitcoin.

Rebalancing helps restore a healthier long-term allocation and prevents crypto gains from skewing your financial plan. Zigmont aims for less than 10% of a total portfolio when working with clients.

A “post-balance crypto allocation” could look like equity in diversified exchange traded funds, municipal bonds or other fixed income, Morris said, turning crypto wins into real assets.

All three experts agree that once you’ve made meaningful profit on bitcoin and secured your gains, the next move is broad diversification. Crypto profits should be rolled into a broad-based equity investment in the U.S. and International stock markets, Zigmont recommended, with an 80/20 split.

Parikh recommended diversifying assets into index funds, REITs, high-yielding CDs or dividend-paying stocks. He warned against taking bitcoin profits and investing in other altcoins “without proper due diligence.”

After a large, unexpected gain, your financial life and your attitude toward your wealth may shift dramatically. Parikh suggested that crypto gains put you in a position “to prioritize wealth preservation over aggressive growth.”

But Zigmont warned that bitcoin gains can inflate investors’ sense of risk.

“They may feel like they can outsmart the market, which they can’t over the long run,” he said. Instead, work with a financial professional to set new goals.

Experts warn that overconfidence and lack of discipline often cause investors to squander or lose their gains. The professionals see clients step into the same pitfalls frequently.

“Dumb things that people might do after having big gains in bitcoin are being really speculative, over trading, leverage, chasing meme coin tokens [or] forgetting about diversification,” Morris said.

Treat your bitcoin gains wisely now, and they can keep working for you long after the excitement fades.

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If You’ve Made Money on Bitcoin, This Should Be Your Next Move

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