Before removing some risk from bitcoin profits, advisor recommends considering certain factors.

• Bitcoin's price surpassed $100,000 in early December and remained up more than 130% year-to-date, as of Dec. 18.
• Some investors possess significant bitcoin holdings, but may need to adjust their positions to better match their investment objectives, risk tolerance, and time horizon.
• When selling from a brokerage or exchange, it's important to consider capital gains taxes.

Numerous investors are still undecided about whether to maintain their bitcoin holdings or realize profits from the recent bull run to new record highs.

Financial experts suggest that investors may need to rebalance their portfolio by shifting assets to align with other financial goals after a successful year for bitcoin.

As of Dec. 18, the price of the flagship digital currency had surpassed $100,000 and was still up more than 130% year-to-date.

Certified financial planner Douglas Boneparth, president of Bone Fide Wealth in New York, stated that some investors with large bitcoin allocations could potentially "reduce their risk."

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Boneparth, a member of CNBC's Financial Advisor Council, emphasized the importance of the golden rule of not investing more than you're willing to lose, particularly when dealing with speculative assets.

Before investing bitcoin profits in other assets, you may want to use the gains to achieve a different financial objective, such as early retirement or purchasing a home, advised the individual.

Decide on your 'line in the sand'

Boneparth suggested that there is a different thought process if you want the money to remain invested.

Typically, clients choose an asset allocation based on their goals, risk tolerance, and timeline.

He stated that there is often a "line in the sand" for the maximum percentages of a single asset.

Before trimming allocations of one holding, Boneparth typically uses no more than 20% of a client's "investable net worth," excluding their home.

'There's no free lunch' with taxes

If you sell crypto in a brokerage account or exchange, you may be subject to taxes on growth, based on the length of time you've owned the asset, according to Boneparth.

"Just because it's crypto doesn't mean you're exempt from paying taxes on your gains," he said. "There's no free lunch."

If you own crypto for one year or less, you will be subject to regular income taxes on your profits. However, if you own profitable crypto assets for more than one year, you will be taxed at 0%, 15%, or 20% on your long-term capital gains.

Experts suggest that you can avoid paying taxes on your crypto gains if you fall into the 0% long-term capital gains bracket for 2024.

In 2024, you can qualify for the 0% tax rate if your taxable income is $47,025 or less for single filers and $94,050 or less for married couples filing jointly, including any gains from crypto sales.

According to Andrew Gordon, a tax attorney, certified public accountant and president of Gordon Law Group, that strategy is highly effective if you fall within that category.

The 0% capital gains bracket may be larger than anticipated because it is determined by taxable income, which is calculated by subtracting the greater of standard or itemized deductions from adjusted gross income.