Investors can still take advantage of the tax loophole to help them wait for cryptocurrency’s return. Bitcoin closed the year with a 32% decline from its November high of $68,000. The crypto traded at $46,000 on Friday.
- Bitcoin’s year ends in a slump, but investors can take advantage of the drop in price.
- Cryptocurrencies don’t fall under the wash sale rule, which is applicable to most securities.
- To offset capital gains taxes, crypto traders can either sell their assets at a loss or buy back in at the exact same price.
The consensus of technical analysts such as Scott Melker (host of “Wolf Of All Streets”) and Carl Runefelt, a crypto investor/influencer, is that bitcoin’s price will likely stabilize sideways for a few more months and hover around $40,000s to $50,000.
Runefelt stated previously to Insider that the large correction in bitcoin’s prices means buyers will need to recover momentum.
Runefelt told Insider that bitcoin could reach six figures if it can break $53,000 on a regular basis.
Investors who have taken a loss could still get a tax credit. In general, capital losses can be offset by taxes on gains.
Crypto has a distinct advantage over overstocks in that it doesn’t have to be washed. Awash sale is when a security sells at a loss and is repurchased soon after. Any losses incurred when this happens with securities are not deductible
To take advantage of the tax-loss harvesting rule, some seasoned crypto traders deliberately sell their digital assets below purchase price.
This tax loophole exists because cryptocurrencies can be viewed as security rather than property. Future regulations could end this loophole.
Technically, the sale triggers a capital gain loss. However, the investor has re-entered the position at the same price so they are still playing in the game and waiting for the next rally. Investors must believe that crypto’s prices will rise in the future to make this a success.
Crypto is volatile but large-cap coins like bitcoin and ethereum continue to rise despite steep plunges. However, this may not hold true for smaller-cap cryptos with higher risk.
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