Financial Advisers Pitch Bitcoin to Investors to Offset Portfolio Losses
The new managed crypto accounts take advantage of a tax-loss harvesting loophole.
✒ The trick is that if the value of the purchased cryptocurrencies fall, they will be sold automatically to generate a taxable loss that can be used to offset other investment gains. The accounts can then buy the coins back in a short time for around the same price or even less.
Investors can do so because cryptocurrencies are (currently) treated as property by the IRS, therefore the “wash sale” rules do not apply — which restrict capital-loss reductions for stocks, bonds, options, and other securities when investors purchase an asset within 30 days of selling it for loss.
This “tax optimisation” will most likely will go away eventually.