Steep value declines in cryptocurrency have sent some investors scrambling to salvage something from the losses. One time-tested method, tax-loss harvesting, may be effective.
“If you’re underwater in your crypto portfolio, you can realize losses to offset other capital asset gains and reinvest in assets that hopefully increase in future value,” said Lou LaValle, managing director of 3iQ Digital Assets (U.S.) in Hoboken, N.J.
Tax-loss harvesting is a straightforward strategy and fairly common practice in the world of traditional assets. Among the nuances of crypto that many clients may not know is that, even though the IRS considers a security sold at a loss and repurchased within 30 days a “wash sale” that can’t be written off, this view doesn't apply to cryptocurrency.
“There’s no 30-day window, which makes crypto tax loss harvesting a more advantageous portfolio strategy, especially during periods of increased market volatility,” LaValle said.
Bitcoin is off roughly 65% from its...
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