Why did Bitcoin fall at the end of the year? US investors are taking advantage of tax-saving strategies.

According to Bloomberg reports, the decline in Bitcoin prices by the end of 2025 presents a rare and highly attractive opportunity for cryptocurrency investors to engage in “Tax-loss Harvesting.” Since current US laws classify cryptocurrencies as “property” rather than “securities,” these assets are not yet subject to the “Wash-sale Rule,” allowing investors to immediately repurchase after selling at a loss. This operation can effectively offset annual capital gains and even reduce some ordinary income.

Core Mechanism and Legal Basis of Tax-loss Harvesting

“Tax-loss Harvesting” is a common tax-saving strategy in financial management. Investors realize “realized losses” by selling assets with paper losses, thereby offsetting taxable gains from other investments (such as stocks or real estate). In the US, if capital losses exceed capital gains, investors can deduct up to $3,000 of ordinary income (like wages) annually. The rationale behind this strategy is to reduce overall tax burden and convert “locked-in” losses into tangible tax assets, optimizing after-tax investment returns.

Unique “Wash-sale Rule” Exemption Space for Cryptocurrencies

The biggest difference from stock trading is that stocks are subject to the “Wash-sale Rule”(wash-sale rule), which disallows claiming a loss if an investor buys “substantially identical” securities within 30 days before or after selling at a loss. However, according to the IRS’s current classification, Bitcoin and other cryptocurrencies are considered property, and the 30-day restriction does not apply. This means investors can sell Bitcoin on December 31 and immediately buy it back within minutes. This legal “gap” allows cryptocurrency investors to realize tax losses without changing their long-term positions.

MicroStrategy’s sole sale of Bitcoin at the end of 2022 for tax purposes, followed by repurchasing 2,500 BTC two days later, exemplifies this. The company’s statement was that the Bitcoin sale loss could be deducted from prior capital gains. If federal tax law permits such loss deductions, MicroStrategy could benefit from tax discounts.

US Tax Deadline: The Critical Moment of December 31

The US tax year is based on the “calendar year,” so the tax planning deadline for 2025 is December 31. All transactions intended for tax deductions in that year must be completed before this date. Since the cryptocurrency market operates 24/7, investors have great flexibility to make adjustments until the last moment.

Stock Market Rises While Bitcoin Declines, Sell BTC for Tax Savings First

This year, gold and stock markets generally rose, but Bitcoin experienced a downturn. This divergence provides investors holding multiple assets with a clear motivation for tax saving: selling losing cryptocurrency positions before December 31 to offset stock gains, especially for those who bought near the crypto peak in October.

Will Cong, a finance professor at Cornell University Samuel Curtis Johnson Graduate School of Management, stated that the timing of Bitcoin’s price decline this year is crucial. Investors who bought near the high points can now exit early, and market volatility this year has amplified this opportunity.

Whether Bitcoin will rebound in January 2026 remains uncertain. Cong’s research indicates that cryptocurrencies only exhibited a typical “January Effect” after the IRS strengthened regulation in 2018. This regulatory push is expected to intensify: starting in 2026, exchanges and brokers will be required to report their total cryptocurrency sales revenue to the IRS using the new 1099-DA form for the first time.

This article Why Does Bitcoin Decline at Year-End? US Investors Leverage Tax Strategies first appeared on Chain News ABMedia.