What Happens if You Lose Money on Cryptocurrency?

January 23, 2022
Knowledge Center » Blog » What Happens if You Lose Money on Cryptocurrency?

Trading in cryptocurrency can be a high-risk, high-reward investment. In the article below, we'll discuss how to avoid pitfalls and prepare for the worst, whether you're a novice or a pro. This is what happens if you lose money on cryptocurrency.

What Happens When You Lose All Your Money Trading Cryptocurrency

I don't want to say that I'm the only one who has lost money trading cryptocurrency - but I've lost more than most. It can be a very volatile market and it's all too easy to get caught up in the hype of FOMO (fear of missing out).

It's important to remember that you're not just gambling with your money when trading cryptocurrencies, you're gambling with your future. However, there is some good news. Because cryptocurrency gains are taxable, that also means that your cryptocurrency losses can be deducted from your tax burden. They can either be used to offset your other capital gains or you can deduct up to $3,000 per year off of your taxable income, and losses carry forward into future years as well.

If you have incurred losses and are looking for a tool that will automatically minimize your tax burden, look no further than Ledgible. You can learn more here.

Top 3 Mistakes People Make Trading Cryptocurrency

The most common mistake people make is when they sell their cryptocurrency too soon or at the wrong time. Remember, you only want to invest money in volatile assets like cryptocurrency that you are willing to lose. Also remember that because cryptocurrency is volatile, it can go up and down 20%+ in the matter of a day or two. If you are nervous and sell when the cryptocurrency is down, you might miss out on the opportunity to make your money back when the currency goes back up. Another mistake people make is not using stop-losses and one of the most frustrating mistakes in trading cryptocurrencies is not taking into account how volatile the prices can be. Stop losses allow you to set a limit of how much you're willing to lose on the cryptocurrency before it automatically sells and protects you from further dips.

How to Stop Losing Money on Cryptocurrency?

You can protect yourself from this kind of situation by not buying more than you can afford and not investing all your money in cryptocurrencies. The world of cryptocurrency will likely continue to be extremely volatile for the foreseeable future. While trading can certainly be fun, it's definitely not for the feint of heart. And remember, don't invest more into cryptocurrency than you are willing to lose.

About Trevor English

Trevor is a technology journalist & engineer who has made a career out of engineering and technical communication. His work has appeared on Curiosity, BBC, Interesting Engineering and other sites across the web. Originally the Chief editor for Interesting Engineering back in 2016, he now works with software & tech companies, aiding them in content marketing and technical communication. Currently living in Texas, he’s also a published children’s book author and producer for the YouTube channel Concerning Reality.

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