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You generally only pay taxes on crypto when you dispose of it, not for simply holding it. Converting crypto to cash is considered a disposal event for tax purposes.
Here's a breakdown of when crypto transactions are taxable:
* **Selling crypto for cash:** This is the most common scenario and triggers a capital gains tax event. You'll owe taxes on the profit you made from selling the crypto.
* **Trading crypto for another crypto:** This is also considered a taxable event by the IRS (and likely other tax authorities). Even though you aren't converting to cash, it's treated like a sale of one asset (the first crypto) and the purchase of another (the second crypto).
There are also other crypto transactions that may be taxable, such as using crypto to pay for goods and services or earning interest on crypto holdings.
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