Rushing before the end of the year, the more prices fall, the more they sell! Cryptocurrencies have become "tax-offsetting" assets for American investors.

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Bitcoin's recent sharp pullback is unexpectedly creating an excellent window for U.S. investors to use the "tax loss harvesting" strategy to lower their tax bills.

On December 26, according to Bloomberg, as Bitcoin’s price has dropped 30% from its all-time high, a strategy known as "tax loss harvesting" is becoming more active in the digital asset sector than in previous years. This strategy allows investors to sell losing assets and use those losses to offset capital gains, thereby reducing taxable income.

The main driver behind this phenomenon is the huge divergence in asset performance this year. While Bitcoin, the world's largest cryptocurrency by market value, has fallen more than 6% year-to-date, the U.S. stock benchmark S&P 500 index has risen about 18% over the same period. This divergence provides a clear incentive for investors holding both types of assets: sell losing cryptocurrencies before December 31 to offset stock profits and reduce tax burdens.

Unlike stocks, according to current IRS rules, spot cryptocurrencies are not subject to the "wash-sale rule," which prohibits repurchasing within 30 days. Investors can sell losing assets and buy them back the same day.

For stock investors, if they wish to claim tax losses, they must abide by the "wash-sale rule," which requires waiting 31 days after selling a losing stock before buying it back. If repurchased earlier, the IRS will disallow that tax deduction.

Due to this flexibility, such "harvest loss and repurchase" trading activities are concentrated in the last few days of the year.

It is worth noting that this relaxed regulatory environment may not last forever. Starting in 2026, U.S. exchanges and brokers will, for the first time, be required to report total gains from cryptocurrency sales to the IRS via a new 1099-DA form, and regulatory enforcement is expected to strengthen.

Risk Warning and DisclaimerThe market carries risks; investments need caution. This article does not constitute personal investment advice and does not take into account an individual user's special investment objectives, financial situation, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing accordingly is at your own risk. ```