Whether to cover your taxes or to treat yourself, there are a variety of factors that go into the decision of when and why to cash out your crypto. During our user research, and as we’ve gotten lots of great feedback from early users who are excited to use Skyteller, we’ve found that you all off-ramp for many different reasons… here are the 5 most common:
Taking care of daily life
Many of you work and get paid in crypto, but still need to pay rent, buy groceries, or cover utility bills in fiat. Cashing out some or all of your crypto earnings gives you the financial flexibility you need to manage your day-to-day expenses. There are also times when you need access to cash quickly to take care of unexpected expenses, such as medical bills or home repairs. In those cases, people often dip into their crypto to pay for these larger but necessary expenses.
Covering your Taxes
One of the other main (and very timely) reasons you convert your cryptocurrency to fiat is to pay taxes. While some governments have yet to fully clarify their stance on how cryptocurrencies are taxed, in many countries, including the United States, cryptocurrencies are treated as property for tax purposes. This means that any gains made on cryptocurrency investments are subject to capital gains tax and any earnings are subject to income tax. In order to meet their tax obligations, people working in crypto have various strategies for saving or planning for taxes (right? 😅), but most of them involve converting some crypto to cash. Stay tuned on this… we’ve got some great ideas for Skyteller to help y’all with this!
While cryptocurrency has the potential for high returns, it’s also a highly volatile asset class. The value of cryptocurrencies can fluctuate rapidly, and there is always risk. Some people mentioned that they periodically cash out their crypto to diversify their investment portfolios into other types of investment opportunities, reducing exposure to the risks of both working and investing in crypto.
Less exposure to volatility
Very related to diversification is the fact that fiat is (generally) less volatile than cryptocurrency. When you get paid in crypto, you’re used to the actual value fluctuating. But it’s not great. Cashing out your earnings gives many folks peace of mind around their paychecks. Converting some or all of your earnings into fiat currency separates your income from your crypto investments.
Finally, another great reason why people choose to convert their crypto to fiat is to treat themselves! Whether it’s buying a new car, going on a vacation, or simply indulging in something they’ve been eying forever, converting some crypto into fiat can provide the mental separation of funds to make those purchases. We heard quite often that people felt better spending some of their crypto gains on big purchases rather than selling off other investments or dipping into their savings/emergency funds.
Of course, everyone’s situation is unique, so it’s important to carefully consider your own goals and needs before making any decisions. In some upcoming posts, we’ll dive deeper into each of these reasons to off-ramp and how to use Skyteller to set up simple and straightforward ways to help you off-ramp whenever needed!