Few areas of the market have fallen as sharply as cryptocurrencies. Bitcoin, the largest and most widely followed digital asset, is down roughly 45% from its all-time high. Ethereum and Ripple — the second- and third-largest cryptocurrencies — have each declined around 60% over the past six months. Several popular crypto-related stocks, including Coinbase and Strategy, are also down more than 60% from their 2025 highs.
For investors who maintain exposure to this space and intend to keep it, these pullbacks may present tax-loss harvesting opportunities.
Using the crypto sell-off for tax losses
Many investors today own crypto exposure through ETFs rather than holding tokens directly. That distinction matters. Crypto ETFs trade like stocks and are subject to the wash sale rule. This means if you sell a Bitcoin ETF at a loss and immediately repurchase the same fund, the loss is disallowed.
However, investors can often sell one ETF and purchase a similar — but not identical — ETF to maintain exposure while capturing the loss. For example, selling the iShares Bitcoin ETF (IBIT) and replacing it with the Fidelity Bitcoin ETF (FBTC) can preserve market exposure while realizing a capital loss for tax purposes. Most brokerage firms track wash sales by CUSIP number, so switching issuers typically avoids triggering the rule.
For investors holding crypto directly, current tax treatment differs, as digital assets are treated as property rather than securities. That can allow for even more flexibility when harvesting losses. Either way, volatility in this asset class can create planning opportunities rather than just discomfort.
Practical replacement examples
Below are examples of how investors might think about maintaining exposure while harvesting losses. These are illustrations — not specific recommendations — but they show how the strategy can work in practice.
Bitcoin ETFs
Sell: iShares Bitcoin Trust (IBIT)
Replace with: Fidelity Wise Origin Bitcoin Fund (FBTC) or another spot Bitcoin ETF
The exposure is similar, but the CUSIP is different, which typically avoids wash sale treatment.
Crypto Equity Exposure
Sell: Coinbase (COIN)
Replace with: Circle (CRCL), or a diversified crypto-equity ETF such as IBLC or BKCH
This maintains exposure to the broader crypto ecosystem — exchanges, infrastructure, blockchain companies — while realizing a loss in the original holding.
Ethereum Exposure
Sell: An Ethereum ETF or direct ETH position
Replace with: A different Ethereum ETF issuer or a broader digital asset fund
The goal is not to change the portfolio’s thesis — it’s to preserve it more tax-efficiently.
To put numbers around this, consider a $3,000 harvested loss. For an investor in the 24% federal tax bracket, that loss could reduce taxes by approximately $720. If the loss is used to offset capital gains, the savings may be even higher depending on the applicable capital gains rate. While $720 may not seem dramatic on its own, consistently improving after-tax outcomes year after year can compound meaningfully over time — just like investment returns do.
Don’t let tax losses go to waste
Crypto will likely remain volatile. Sharp moves higher and lower are part of the asset class. Rather than reacting emotionally to those swings, investors can use them strategically — improving tax efficiency while maintaining long-term exposure.
Volatility doesn’t always have to be something to fear. When paired with diversification and thoughtful planning, it can become an opportunity to strengthen your overall financial position.
If you’d like to review whether tax-loss harvesting makes sense within your portfolio, we’re happy to walk through the numbers with you.
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