Bitcoin’s 30% drop turns into a tax shield as investors offset stock gains

Bitcoin has dropped 30% from its high this year, and that drop is doing something useful for a change; giving people a shot at trimming their tax bills. It’s ugly in price, but pretty helpful if you’re sitting on stock profits.

With the S&P 500 rallying by 18% year-to-date while Bitcoin is down about 5%, investors who own assets in both are now dumping their crypto losses to cancel out equity gains.

Tom Geoghegan, who runs Beacon Hill Private Wealth in New Jersey, said:

“Tax-loss harvesting in crypto is being treated as part of the overall tax strategy, especially in a year of strong equity market performance, rather than as a standalone tactic.”

Crypto investors sell and rebuy fast without IRS limits

Tax-loss harvesting works like this: sell an asset that’s gone down, claim the loss, and use it to cut your tax bill. You can wipe out capital gains dollar-for-dollar, and if the losses are bigger than the gains, you can also cut up to $3,000 from your regular income, while rolling over any leftover into next year.

For stocks, the IRS wash-sale rule says you can’t buy the same stock back within 31 days or you lose the deduction.

But with crypto, the IRS sees Bitcoin as property, not a security, so if you sell it and then buy it back right away, no problem.

“You can sell that Bitcoin, buy it on that same day, and it doesn’t trigger that limitation,” said Robert Persichitte, a CPA and financial planner at Delagify Financial near Denver.

Will Cong, a finance professor at Cornell, said timing matters this year. If someone bought Bitcoin during the autumn peak and held on, they’re now deep in the red. “A 30% decline from an autumn peak tends to create precisely that situation for more recent entrants, which historically amplifies year-end selling pressure,” Cong told Bloomberg.

Final weeks of 2025 show rise in deliberate crypto tax strategies

Because there’s no 31-day wait rule in crypto, people are doing the sell-and-rebuy move all in one go. Cong said, “The lack of a wash-sale constraint makes the ‘harvest-and-rebuy’ trade easier to execute immediately, and that tends to concentrate activity around the most tax-salient dates.” In simple terms? The selling happens fast and near the deadline.

And this isn’t just a bunch of traders winging it. Geoghegan said clients are thinking about Bitcoin more seriously. They’re using crypto losses to offset stock or private investment gains.

“In some cases, clients are harvesting losses and re-establishing exposure quickly; in others, they’re using harvested losses to offset realized gains elsewhere, such as equities or private investments,” he said. It’s no longer just about crypto. It’s part of a bigger tax plan now.

But the future might get trickier. Cong said crypto didn’t really show the typical “January effect” until after the IRS cracked down in 2018. And by 2026, the crackdown will go further. Brokers and exchanges will have to file a new form, 1099-DA, reporting crypto sale proceeds to the IRS for the first time.

This, of course, raises the stakes. “More volatility makes this more important to consider,” said Persichitte. “If you can harvest that loss with very little restriction or consequences, it makes the loss a lot more palatable.”

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