Bitcoin has fallen 30% from its all-time high, prompting financial advisers to anticipate increased tax-loss harvesting in digital assets this year. With the cryptocurrency down 5% year-to-date while the S&P 500 has risen 18%, investors face incentives to sell losing crypto positions to offset stock gains before the December 31 deadline.
The recent downturn in Bitcoin, the world's largest cryptocurrency by market value, has dropped it 30% from its peak, creating unusual conditions for tax strategies. Financial advisers indicate this slide is likely leading to more tax-loss harvesting in digital assets compared to prior years. This practice involves selling underperforming investments to realize losses that can offset capital gains elsewhere, potentially reducing tax liabilities.
Year-to-date, Bitcoin has declined by 5%, contrasting sharply with the S&P 500 index, which has climbed roughly 18% over the same period. This divergence provides a clear opportunity for investors holding both asset classes. Those who purchased Bitcoin near its October high stand to benefit most by offloading positions before the year-end cutoff on December 31.
Such moves allow gains from equities, including stock exchange-traded funds, to be balanced against cryptocurrency losses, in line with Internal Revenue Service guidelines on capital gains. The trend highlights the growing integration of crypto into broader wealth management, though advisers note the strategy's effectiveness depends on individual portfolios and tax situations.
