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This article first appeared on GuruFocus.
Bitcoin (BTC-USD) is entering the final stretch of the year under pressure, with a roughly 30% slide from its all-time high creating conditions advisers say could be driving heavier tax-loss harvesting than in prior years. While Bitcoin is down about 5% year-to-date, the S&P 500 (SPY) has risen roughly 18% over the same period, a divergence that advisers say is encouraging investors to sell underwater crypto positions to potentially offset equity gains before Dec. 31, particularly for purchases made near October’s peak. Some advisers note that tax-loss harvesting in crypto is increasingly being treated as part of a broader portfolio-wide tax strategy rather than a standalone trade.
The structure of U.S. tax rules may be reinforcing that behavior. In equities, the IRS wash-sale rule requires investors to wait 31 days before repurchasing a stock sold at a loss, or risk losing the deduction, while spot cryptocurrency, classified as property rather than securities, does not face that restriction. As a result, crypto holders can sell and repurchase Bitcoin in the same session without triggering the wash-sale limitation, a feature advisers say could concentrate selling and rebuying activity into the most tax-sensitive days at year-end rather than spreading it across the quarter. Losses can offset capital gains dollar-for-dollar, with up to $3,000 deductible against ordinary income and additional losses carried forward.
Timing and volatility are also central to the current setup. Investors who entered near the autumn peak now have losses available to harvest, and academic research suggests a decline of this magnitude often amplifies year-end selling pressure when wash-sale constraints are absent. Whether Bitcoin sees a January rebound in 2026 remains uncertain, with research indicating crypto did not show a classic January effect until after tighter IRS enforcement began in 2018. That scrutiny is set to intensify further in 2026, when exchanges and brokers will be required to report gross proceeds from crypto sales to the IRS using a new Form 1099-DA, a change advisers say could make disciplined tax planning more relevant in volatile crypto markets.