Crypto Tax-Loss Harvesting: Surviving Through the Bear Market

In recent months, the Federal Reserve has created stricter policies while also increasing interest rates by a considerable amount in an attempt to curb high inflation. As is the case with nearly all financial markets, the crypto market has been hurt by the rising interest rates as well as the worsening economic conditions.

Recently, the total market cap for cryptocurrencies dipped below $1 trillion, which marks the first time that this has occurred since January 2021. Currencies like Ethereum and Bitcoin are at their lowest prices since December 2020. Now that we're in bear market territory, it's time to utilize a strategy like crypto tax-loss harvesting.

What Is Crypto Tax-Loss Harvesting?

Crypto tax-loss harvesting is a popular investment strategy that involves selling assets at a loss to effectively offset capital gains from other investments. People who use this tax strategy are able to reduce their total tax liability.

When you perform crypto tax-loss harvesting, you can reduce the amount of taxes you owe by selling assets at a price that's lower than what you paid for them, which can be helpful if you have any capital gains for the year. Keep in mind that realized gains can be taxed. Selling assets at a loss lets you accrue capital losses, which will directly offset your capital gains.