What if selloff was triggered by tax loss harvesting?

In the US if you sell a security at a loss, you get to deduct the amount of the loss from your taxable income or from longterm capital gains.

Here is the catch though:

  1. If you sell an asset and buy another of the same kind within 30 days, your lose your right to deduct your losses from taxable income.

  2. You have until December 31 to sell your losing positions to claim your losses.

Here is a thesis:

  1. 2018 hasn’t been kind to crypto crowd. Investors are sitting on huge piles of paper losses. What do you do when you have losses but believe in the long term potential of your investments?

  2. You sell them and claim losses on your tax bill. 30+ days later (January-February depending on when you sold), you get back in.

  3. What if the selloff is triggered by large holders who are liquidating their positions now to buy back their crypto in 2019?

  4. If so the Bear market is likely to end by December 31st. Sell pressure is probably going to abate as early as the end of next week. For investors looking to take positions early in January 2019, the deadline to sell their investments is November 30th.

If this thesis is correct, we will hit the bottom in December. We are likely to see a significant slowdown in selling pressure starting December 1st.

By Q1 2019 we may see a complete reversal as investors return to the market along with institutional money.

What do you think?

PS: this is not financial advice. Please do your own research.


Definitely contributed to the timing, and also people need money for Christmas etc. Lots of investors are retail and took out debt and many of them will cover up the holidays specially once they realize their bounce isn’t coming.

But it was going to happen anyway regardless of timing or trigger event.


Timing is important if you want to maximize your exposure for 2019.

It is also important to wait till the end of 2018 to minimize losses. Depending on where you calculus lies, you may do one or another… or something in between.

The two dates (December 31st and December 1st) are the upper and lower boundaries for the strategy.


What about the Chinese New Year.
Could this just cause the price to go sideways for a bit ?

I am not familiar with the range of catalysts that Chinese Year may trigger. I can’t think of any except for maybe people taking some time off.

Any ideas why it’s important?

I thought I had read some where that since the Chinese New Year (Tuesday 5 February) was their largest celebration that there would be a natural sell off.(Funding the party).

That’s an interesting angle/event to follow. Thanks for pointing this out.

Looks like selling pressure is leaving the market.

Those who want in as early as Jan 1st have till Friday to offload their positions. Many of them seem to have done so.

The board is green again.


Nice to see green again!

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Those who wanted to maximize tax loss harvesting and maximize their 2019 crypto exposure have already sold off all their positions.

Much of December we are likely to see upward trending or (worst case) a flat price line.

Starting January 1st the bulls are likely to return in full swing.


What he said :grinning:

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