Tax-loss harvesting is the strategy of deliberately selling assets at a loss to offset capital gains elsewhere in your portfolio. In crypto, this strategy is uniquely powerful: unlike stocks, crypto has no wash-sale rule (as of 2026), meaning you can sell at a loss and immediately repurchase without penalty.
Suppose you have $10,000 in capital gains from Bitcoin profits this year, which would create a significant tax bill. You also hold $6,000 of Ethereum purchased at $4,000 that's now worth $2,000 (unrealised loss of $2,000).
By selling that ETH and realising the $2,000 loss, you reduce your net capital gains from $10,000 to $8,000. If you're in the 22% short-term bracket, that saves you $440 in taxes immediately. And if you immediately rebuy ETH at $2,000, your position is exactly the same — you just lowered your cost basis and locked in a tax benefit.
The wash-sale rule prevents investors from claiming a tax loss if they repurchase the same security within 30 days. This rule applies to stocks and bonds, not to cryptocurrency (as of current IRS guidance in 2026). This means crypto investors can:
Note: Congress has periodically proposed extending wash-sale rules to crypto. Monitor legislative developments, as this advantage may change.
If your capital losses exceed your capital gains in a year, you can carry forward up to $3,000/year to offset ordinary income, and carry over the remainder indefinitely into future years. This makes harvesting during bear markets especially valuable even without offsetting gains.