Bitcoin fell from a high of over $67,000 to its current level of just under $20,000.

New York:

When Doug Milnes started buying cryptocurrency in January, he felt it could become an entirely new asset class for investors.

It made him feel extremely uneasy at this moment.

The Summit, N.J.-based executive said his holdings, which include several different cryptocurrencies such as ethereum, are about 60 percent smaller than what he bought. 2% of his is now about 0.8% — leaving him scratching his head about whether to stick with it, get out, or buy the dip.

“Cryptocurrencies have gone through multiple booms and busts over time, and it’s hard to know if this time is different,” Milnes said. “I don’t know if my feelings have influenced my judgment. It’s hard to be confident about what to do next.”

It’s certainly been a harrowing year for cryptocurrencies, and Milnes isn’t the only one trying to figure out the plunge chart. The total market capitalization of cryptoassets has grown from nearly $3 trillion in November 2021 to about $900 billion on June 29, according to tracker CoinMarketCap.

At the same time, the dominant cryptocurrency Bitcoin fell from a high of over $67,000 to its current level of just under $20,000.

“There are people who have built their portfolios in the euphoria of the past few years without thinking about bigger plans,” said Kristin Benz, director of personal finance at investment research firm Morningstar. She added that the recent losses is a good motivation to ask yourself some questions, including how much risk can you take and what kind of losses can you afford?

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“If you haven’t gone through this process on the front end, it’s worth considering now,” Benz said.

Of course, crypto is not alone in the turbulent 2022. The stock market officially fell into a bear market in early June — as of Wednesday, the S&P 500 was down more than 19% year-to-date and the Nasdaq was down more than 28% over the period.

The uniqueness of cryptocurrencies has skeptics likening any move now to “closing the barn door after the horse has run away,” said Peter Pallion, president of East Norwich, N.Y., masterplanning consultancy. “Unless you think about it further, horses are real things with real value, and cryptocurrencies — as John Paulson famously put it — are finite supplies.”

Regardless of your personal stance on cryptocurrencies, the key to dealing with extreme market moves is to have proper planning so you don’t act out of pure panic. Some advice from experts:

Reassess your risk tolerance

If this year’s cryptocurrency downturn has made you you’re incapable of handling the volatility, then don’t take more risk.

After all, just because the losses are heavy, it cannot be ruled out that there will be more losses. “If you find yourself overstretched, maybe you’re not a good candidate to own the asset class,” Benz said. “There’s nothing to be ashamed of.”

write-off losses

This may seem like consolation, but if you lose value in crypto trading, you have until April 15th to write off a certain amount.

Kevin Lum, founder and CEO of Foundry Financial in Los Angeles, said: “For clients with significant positions in the crypto space, we recommend using this time to tax lost gains.”

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Losses play the same role as stocks, Lum said. If your losses exceed your total capital gains for the year, you can deduct up to $3,000 from your ordinary income. “Losses over $3,000 can be carried forward to death to offset future gains.”

Limit Allocations

As with any more speculative investment, it’s wise to keep it at a certain percentage of your holdings — a specific “bucket” that won’t flood the rest of your portfolio.

“A good framework is to set a ceiling,” Mercedes said. “Think about all your speculative assets and give them a 5% or 10% position in your portfolio — whether it’s cryptocurrencies, precious metals, micro-cap companies or anything else.”

For example, while Doug Milnes’ crypto has come under fire, that’s not to say he’s betting his entire future on it.

“There’s a lot of uncertainty about what to do next, but at least I’m not worried about my retirement,” he said. “My advice to other crypto investors is not to put all your eggs in one basket.”

(Apart from the title, this story was unedited by NDTV and was posted from a syndicated feed.)

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