TLDR
- Investors are using cryptocurrency losses to offset record gains from the S&P 500.
- Unlike stocks, crypto is not subject to “wash-sale” rules, allowing for immediate repurchases.
- Experts warn of increased selling pressure before the new 1099-DA form takes effect.
Bitcoin recently fell 30% from its peak this autumn, which has turned out to be an unexpectedly useful tool for taxpayers. While the traditional stock market had a solid year, with the S&P 500 reaching 18%, those who put capital into investing in Bitcoin are taking advantage of their “red numbers” to map out tax-loss harvesting strategies.
This strategy allows holders to sell their assets in the red to cancel out capital gains obtained from other investments, such as stocks or real estate. If losses exceed gains, taxpayers can deduct up to $3,000 from their ordinary income, carrying over the surplus to the next fiscal year.
The Strategic Advantage of “Harvest-and-Rebuy” in Crypto
One advantage of investing in Bitcoin compared to the stock market is the absence of the IRS wash-sale rule. In the traditional market, an investor must wait 31 days to repurchase the same asset if they wish to claim the loss.
However, since the regulator treats Bitcoin as property and not as a security, users can sell and repurchase their positions on the same day, maintaining their market exposure while securing the tax benefit.
Certified Public Accountant Robert Persichitte explains it clearly: “You can sell that Bitcoin, buy it on that same day, and it doesn’t trigger that limitation.” This flexibility is concentrating selling activity in the final weeks of December as investors look to optimize their portfolios before the end of the year.
However, the scenario could soon become more complicated. By 2026, the IRS will require brokers and exchanges to file Form 1099-DA, which will increase scrutiny on every transaction.
In summary, for now, those who chose to start investing in Bitcoin during the autumn peaks see the current volatility as a way to make losses “more digestible” through comprehensive tax planning. They are integrating their digital assets into a global financial strategy that no longer treats them as isolated islands.
