Social Security

His Bitcoin-and-Ether ETF Will Liquidate October 21. The Forced Cash Redemption Can Make More of His Social Security Taxable

CoinShares is closing two crypto ETFs on October 21, which forces a taxable sale on shareholders who never clicked sell. For retirees collecting Social Security, that involuntary gain can quietly push hundreds or thousands of extra dollars into taxable income.

By Gerelyn Terzo
Published October 3, 2026, 2:00pm ET · 4 min read

The Full Benefits Desk desk. Editor: Gerelyn Terzo.

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Close-up view of several gold-colored cryptocurrency coins, with a large Bitcoin symbol clearly visible on the main coin. Three black cube-shaped beads with white letters spelling 'E', 'T', and 'F' are placed on the surface of the top coin. The coins are resting on a dark, reflective surface, showing subtle reflections.
A prominent gold Bitcoin coin is topped with 'ETF' letter blocks, symbolizing the convergence of cryptocurrency with traditional Exchange Traded Funds. © 24K-Production / Shutterstock.com

CoinShares announced on September 18 that its CoinShares Bitcoin and Ether ETF (NASDAQ:BTF) and CoinShares Altcoins ETF (NASDAQ:DIME) will liquidate on or around October 21, 2026. Shareholders can sell on Nasdaq through the close on October 20. Anyone still holding shares at liquidation gets cash equal to net asset value once the fund has paid its expenses and liabilities.

A retiree holding BTF in a taxable brokerage account faces an unexpected tax event. The fund is closing, and CoinShares says shareholders recognize a capital gain or loss on the redemption. That gain can pull more of his Social Security benefit into taxable income.

All of this is happening in a soft crypto market. Bitcoin (CRYPTO:BTC) trades near $83,000, down about 25% over the past year. Ether (CRYPTO:ETH) trades near $2,700, down about 35%.

Coinbase (NASDAQ:COIN | COIN Price Prediction) posted a Q2 net loss of $359.5 million as the crypto market remained soft. Even so, Bitcoin is roughly double where it traded five years ago, so someone who bought early can still be sitting on a gain.

He Never Clicked Sell, Yet He Still Has a Taxable Sale

The liquidation turns his shares into cash. The cash he gets minus his cost basis is his capital gain or loss. Only the gain counts as income.

Where he holds the shares determines whether any of this matters. In an IRA or 401(k), the cash stays sheltered and nothing shows up on this year’s return. In a taxable brokerage account, the gain goes on his 2026 return.

How a Forced $20,000 Gain Reshapes His Social Security Tax

The IRS uses combined income to determine how much of his benefit is taxable: half of his Social Security plus other income, including capital gains. For a single taxpayer, benefits start becoming taxable above $25,000. Above $34,000, up to 85% of benefits can be taxed. These thresholds are not adjusted for inflation.

Say he collects $30,000 a year in benefits and takes $15,000 from an IRA. Combined income is $30,000, and only $2,500 of his benefits is taxable.

Now the liquidation adds a $20,000 gain. His combined income jumps to $50,000, well above the upper threshold, and the taxable portion of his benefits rises to $18,100.

So he has $15,600 more taxable Social Security, on top of the gain itself. In this range, each extra dollar of gain makes up to 85 cents of benefits taxable too.

The 85% figure is a cap on how much of the benefit counts as taxable income, not his tax rate. For single taxpayer in 2026, the 12% bracket applies to taxable income over $12,400.

Selling Before October 20 Gives Him More Control

He can sell before the liquidation, but in a brokerage account that is still a taxable sale. What selling early gives him is control. He picks the day, sees the exact gain in advance and can match the sale against losses elsewhere.

Cost Basis Matters More Than the Size of the Check

Take two retirees, each with $50,000 of BTF and the same income as our example. One paid $45,000, so the liquidation creates a $5,000 gain. His taxable benefits rise only slightly, to $5,350.

The other paid $20,000. His $30,000 gain raises his taxable benefits to $25,500, the full 85% maximum. Both get the same check, but their tax bills are very different.

What to Check Before the October 20 Deadline

  1. Account type. Shares in a taxable brokerage account produce a reportable gain. Shares in an IRA or 401(k) stay sheltered.
  2. Basis. His brokerage statement shows what he paid. That number determines how big the gain is.
  3. Paper gain. Current value minus basis estimates how much the liquidation adds to combined income.
  4. Other 2026 income. IRA withdrawals, pension checks, wages, interest, and dividends may already put him near $34,000. If so, reducing an IRA withdrawal or moving a Roth conversion to 2027 could leave room for the gain.
  5. Capital losses. Losing positions elsewhere or losses carried over from past years may offset part of the gain.

A Choice He Planned to Make Himself

Perhaps he bought the ETF expecting to decide for himself when to cash out. The liquidation takes that decision away. For a retiree near Social Security’s tax thresholds, the forced gain may surprise him on next spring’s tax return, and it is far from the only IRS rule that quietly reaches into retirement accounts (we listed nine of them, this one included, in a free report on retiree tax traps).

Every return is a little different. A few thousand dollars of basis or other income can change the math, so it is worth running his own numbers before October 20.

Contact [email protected] for any questions or corrections.

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Gerelyn Terzo

Gerelyn Terzo is the author of dividend investing handbook "Dividend Investing Strategies: How to Have Your Cake & Eat It Too." A veteran financial journalist, she covers agri-finance for outlets like Global AgInvesting and the broader stock market and personal finance for 24/7 Wall Street. She began at CNBC and later helped launch Fox Business in New York. Gerelyn currently resides in Woodland Park, Colorado and dabbles in nature photography as a hobby.

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