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Tax-Loss Harvesting in Crypto: A Significant and Underexplored Opportunity for Financial Advisors

San Francisco • October 5, 2022

The crypto market correction of 2022 has potentially created significant tax-loss harvesting opportunities for investors.

In this white paper, we comprehensively outline why investors may have a significant opportunity to boost after-tax returns by applying tax-loss harvesting strategies to their crypto investments. The report starts with a high-level introduction to tax-loss harvesting and then moves on to show how the return and volatility profile of crypto assets make them uniquely well-positioned to benefit from such a strategy. The paper also describes the current status of tax regulations around tax-loss harvesting in crypto, including how the so-called “wash-sale rule” may apply to the crypto market.

Note: Tax-loss harvesting involves risks. These include, but are not limited to, the possibility that the strategy might result in a negative return contribution and unintended tax consequences. No information in this report is tax advice: The simulations contained herein are intended for illustrative and educational purposes only and those considering implementing a tax-loss harvesting strategy are strongly recommended to consult with a tax advisor. Past performance is not indicative of future results.

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About Bitwise

Based in San Francisco, Bitwise is one of the largest and fastest-growing crypto asset managers, offering both index and active strategies across a wide array of investment vehicles. The firm is known for creating the world’s largest crypto index fund (OTCQX: BITW), a suite of crypto-focused equity and futures ETFs, and investment products that span Bitcoin, Ethereum, DeFi, NFTs, and the Metaverse. Bitwise focuses on partnering with financial advisors and investment professionals to provide quality education and research. The team at Bitwise combines expertise in technology with decades of experience in traditional asset management and indexing, coming from firms including BlackRock, Blackstone, Meta, and Google, as well as the U.S. Attorney’s Office. Bitwise is backed by leading institutional investors and asset management executives, and has been profiled in Institutional Investor, CNBC, Barron’s, Bloomberg, and The Wall Street Journal.

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