From a purely tax bill point of view (for Americans) selling your crypto right now when you’re deep in the red to realize your losses might be an advantageous move. Especially if you have other investments that you expect to be selling for a gain in the foreseeable future.
Losses on capital investments carry forward indefinitely. So if you sell at a loss now, you can lower your tax bill moving forward until you get the money back. Even if it takes several years.
And until the wash-sale rule is applied to cryptocurrency, selling at a loss and buying back in is a feasible tax planning strategy while keeping a somewhat similar position in the grand scheme.
Of course, having long-term capital gains is usually the best way to lower your tax bill in the end, so selling at a loss and re-buying might be a sub-optimal move if the market rebounds and you end up paying short-term tax rates.
But… if you believe it will be a while before you’re in the black (or you’re not going to be closing out your position for a long time) it might be beneficial next year to have realized 30% losses on your crypto investments right now.
If things keep sliding downward you can sell again later on to realize more losses. If things go back up, you still have losses on the books and your subsequent gains will net out against the losses. And if you’re just hodling for a decade, hitting reset on the clock for long-term gains might not matter at all in the end.
I’m not your lawyer. I’m not your accountant. Do what makes sense for your goals and tax situation. I just wanted to point out that there are legitimate reasons to sell the dip. And until the wash sale rule applies, your overall position doesn’t even need to change in a meaningful way. You can always re-buy for a long-term hodl if you’re bullish.
TLDR: There is no shame in tax loss harvesting throughout the year. Look up some articles about how cryptocurrency losses can be helpful for tax planning from last December and see if it makes sense for you to take advantage of realizing losses right now.