Can cryptocurrency still ‘do good’?

Hand putting Bitcoin into charity donation box

May 31, 2024

As most investors know, crypto has historically been a volatile investment. In the fall of 2022, bitcoin lost more than 75% of its value. While it has since bounced back, daily price swings of 5% to 10% are common, and another collapse is always possible.

But on April 8, 2024, Bitcoin reached a record high of more than $72,000—eclipsing its euphoric run of 2021. Just 11 days later the blockchain giant also completed its fourth halving,1 quickly rebounding from a temporary dip in price.

The U.S. financial regulator’s approval in January 2024 of cryptocurrency exchange-traded funds has helped Bitcoin reach its latest peak.

Charitable-minded investors may be wondering: Can I use this momentum to make a difference? My answer: Absolutely.
 

  • First things first: Selling cryptocurrency after it has appreciated is a taxable event.

    This might seem like a given, but a 2021 Fidelity Charitable study found that 38% of crypto investors were not aware that, similar to selling long-term appreciated securities, selling digital assets is a taxable event. The poll also showed that only half of investors knew the asset could be donated to charity. 
     
  • Savvy crypto donors know: This asset has the potential to do even more good for philanthropy than cash, with tax-smart gains for you and the charity.

    Consider this: 63% of contributions to Fidelity Charitable in 2023 were in the form of non-cash assets, including $49 million in cryptocurrency. Why are so many donors trending to crypto contributions?

    1. The tax deduction is generally equal to the fair market value of the donated Bitcoin (as determined by a qualified appraisal).
    2. Instead of paying capital gains taxes on the appreciation, the 501(c)(3) charity receives the full value of your contribution. Those tax savings can then become a direct source of new funding for charitable causes.
    3. You may be targeting the asset with the highest percentage gain in your portfolio—typically the asset that would generate the biggest tax bill if sold: Bitcoin is up over 130% from this time last year, compared to the S&P 500 which has risen just 21% in that same timeframe.
    4. While many nonprofits accept crypto directly, contributing the currency to a donor-advised fund may be easier.
    5. With one contribution, you can support several charities immediately or over time while being eligible to take or claim a tax deduction right away. This strategy may be more administratively efficient than sending smaller amounts of crypto to charities directly and thus having to collect individual tax receipts from each organization. Fidelity Charitable accepts Bitcoin, Ethereum, Litecoin, and, most recently, Solana.
       
  • You’re not alone: Donors are contributing a record amount of cryptocurrency for charity.

    In the first four months of 2024 alone, cryptocurrency contributions to Fidelity Charitable have reached more than $300 million: That’s nearly the same amount contributed in all of 2021, when Bitcoin last surpassed the $60,000 valuation mark. 
     

If donors continue on this trend, charitable crypto contributions may see explosive growth by the end of the year. And if our past data—showing 95% of surveyed crypto owners made charitable contributions in 2021—teaches us anything, it’s that, while volatile, this asset is a popular way to maximize philanthropy well beyond a cash gift. 

Ready to make a difference with crypto? Review your donation options today.

 

1Halving 101 
Bitcoin’s value lies in its limited supply, with a cap of 21 million coins. About every four years, the rate of newly created Bitcoins added to the network is halved. For example, prior to April 19, 2024, 6.25 Bitcoins were added to the network roughly every ten minutes; that number has been halved to 3.125 Bitcoins and will continue to drop until all 21 million coins have been mined. 

Kyle Casserino

Kyle Casserino  

Charitable Planning Consultant

As a charitable planning consultant at Fidelity Charitable, Kyle Casserino serves as a charitable planning resource for advisors and clients. For more than 10 years, he has worked to educate advisors on current charitable planning trends and strategies, along with leveraging the benefits of Fidelity Charitable’s donor-advised fund program, to help philanthropic clients give more to the charities they support. Since 2016, he has helped lead efforts to work with donors and advisors on contributions of cryptocurrency which now total nearly $1 billion.

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