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Crypto doesn’t currently follow a wash sale rule the way stocks do. Explain that, Lee, why that’s important, how does that impact investor behavior?
Yeah, because at the end of the day, we got to remember, we’ve always got to have a little bit of a conversation with Uncle Sam if you will. And so the rules set forth by the IRS say that hey, listen, you can sell something at a loss, you can turn around and buy something else, but you can’t buy that same thing or something very similar to what you sold within a month. Otherwise, they’re going to say, hey, listen, you can’t have that deduction.
So as an example, I can’t uh buy Delta today, turn around, sell it tomorrow and re-enter it and take a loss if there had been a drop in Delta today. Uh so that’s really kind of the wash sale rule says, listen, you got to sit out so to speak, uh for at least a month before you can get back into that specific game or that specific stock. Otherwise, we’re going to say no to that deduction.
So just to make sure I’m understanding, Lee, that means if I’m a long-term Bitcoin bull, I could sell today for a tax loss, but then buy it back almost immediately without a penalty.
Yes, and that is very specific to Bitcoin or cryptocurrencies, right? Um, right now, and again, you know, this is one of those opportunities where hey, we may look up in a year or two and the IRS has sort of tightened the the the noose so to speak around that opportunity. But as we stand here today, you know, if you’re trading directly in, you know, Bitcoin or Solana or one of the other cryptocurrencies, you’re absolutely right. Uh, we can sell today, you know, take the advantage of that loss we’ve had here over the last few months and get right back into Bitcoin because we think that yeah, uh there’s been a pullback but we think things are going to look a lot better in 2026.
Does the strategy we’re talking about here, Lee, tax loss harvesting, does it work the same way for spot Bitcoin as Bitcoin ETFs?
No, it does not. And and that’s a great question. Uh so we’ve had a lot of entrance into the fund complex if you will. So the the Blackrocks and Invescos of the world have made it a lot easier for regular folk to invest in Bitcoin and cryptocurrency. But those are registered as funds. And so if you buy an ETF for an exchange traded fund or exchange traded product that invests in in cryptocurrency, then you got the traditional rules as it relates, you know, as it were a stock or another mutual fund. So it’d be just like if you sold one S&P 500 index fund, uh you couldn’t turn around and say, hey, listen, I’m avoiding wash sale because I I sold my uh Vanguard S&P 500 and turned around and bought a Fidelity S&P 500. So that’s an excellent question. It it is in fact different if you buy crypto through a fund.
