The all-time high of about $68,000 was the lowest point of the year for the digital currency. On Friday, the price was around $46,000.
Many investors were anticipating a year-end bull run that would see the price of the digital currency reach $100,000. The expectation has been pushed off to 2022. While they wait for the coin to come back, investors can take advantage of a tax loophole.
Scott Melker, host of the "Wolf Of All Streets" show, and Carl Runefelt, a digital currency investor, both agree that the price of bitcoin is likely to consolidate for a few months.
Buyers need time to get back on track after the huge correction in the price of the virtual currency.
It could hit six figures and even see a price tag of $300,000 sometime in 2022, according to Insider.
Until then, investors who have taken a hit can use it as a tax break. Capital gains losses can be used to offset taxes on gains.
The wash sale rule doesn't apply tocryptocurrencies. A wash sale is when a security is sold at a loss. Any losses incurred are not deductible when this is done with securities.
The tax-loss harvesting rule allows seasoned traders to sell their digital assets below the purchase price and then buy them back at the same or similar price.
This tax loophole is available because cryptocurrencies are seen as property rather than security. Future regulations may bring it to an end.
Capital gains loss is triggered by the sale. They are still waiting for the next rally since the investor re-enters at a similar price. An investor needs to be confident that the price of the coin will go up in the future.
Even though the plunges have been steep, large-cap coins such as bitcoin and ethereum have continued to go up. It may not be the same for riskier smaller capCryptocurrencies.
