Crypto Wash Sale Rule - Don't Get Hosed! - YouTube

If you own crypto or want to own crypto, you  definitely need to be aware of the big changes  

on the horizon for crypto  and taxes. That is - if this  

new bill passes congress. I’ll  tell you what the bill says,  

why this is BAD for TRADERS, and why it's  GREAT for long term holders like ME.  

The big change on the horizon for crypto is that  the “wash sale rule” might be coming to town. What  

is the wash sale rule? It’s a confusing tax  law that trips up new stock traders all the  

time. In short, the rule says we can’t claim a  loss on our taxes for a security that we still  

have an interest in. Haha what? Okay said a  CLEARER way, we can’t sell a stock at a loss  

and then claim the loss on our taxes IF we buy the  stock back within 30 days of selling. For example,  

I hold palantir in my personal brokerage  account. If my Palantir position went negative,  

by say five thousand bucks, the wash sale rule  prevents me from selling at a loss AND putting  

that loss on my taxes IF I rebuy the palantir  within 30 days of selling at that loss. I can  

sell the stock still, I just can’t get credit  on my taxes for the lost money. If I were to  

wait 90 or 100 days, then rebuy, I’m good, I  CAN claim the loss on my taxes. Get it?  

The wash sale rule is just a very old law setup  to discourage rapid trading of stocks. So, how  

does this change crypto? Well, it doesn’t change  anything just yet. This is a bill, a proposal,  

and it isn’t yet law. But the bill says that  beginning Jan 1, 2022, cryptocurrency will fall  

under the umbrella of the wash sale rule. I see FIVE MAJOR THINGS that are  

going to come from this. Before we get into those five, if you  

enjoy this kind of content, hit that like button  for me so I know what stuff to keep creating.  

The first? Trading volume for all of crypto will  drop off dramatically. Because traders won’t be  

able to claim all of their short-term losses  like they used to. These short-term losses  

will have to be carried forward to adjust the  basis of the coin when they repurchase it.  

This will make the trading more expensive  when you adjust for the tax hit.  

The second? The dropoff in volume I just  mentioned, might not happen entirely during  

2022. Because not all crypto traders are  going to get the memo on this right away,  

or they will get the memo but misunderstand  how the wash sale rule changes things. Wait  

till those traders file taxes in 2023, haha  they’ll be in for quite a surprise. So expect  

trading volumes to lower between the  start of 2022 and early 2023.  

The third? Price stabilization. What's a big  criticism of crypto? That it’s TOO VOLATILE.  

The question stands, how can it be a currency  if every day it's worth wildly more or less?  

As a whole, I think the wash sale  rule is going to DISINCENTIVIZE  

trading in and out of the coins. Now, there’s two sides to this “coin.” One is that  

traders stabilize values through the use  of oversold or overbought indicators like  

RSI and MACD, but I think a larger portion  of traders are actually momentum traders.  

They have a tendency to produce self-fulfilling  prophecies through their jumping on the bandwagon  

of an upswing or a capitulation. So again, I think the net effect  

will be more price stabilization. The fourth? In the SEC and IRS’s eyes,  

the wash sale rule pigeon holes crypto as an asset  instead of a currency. This allows for validation.  

While I don’t agree that all cryptos should be  treated as assets over currency, at least we  

have recognition from the regulatory agencies  that crypto is a legitatment asset class.  

This wash sale legislation is kind of  the SEC and IRS’s way of saying “hey,  

we see you, we notice you. We don’t like  you and we’re gonna make it difficult if  

you keep insisting crypto is the real deal” Nothing about the wash sale rule changes whether  

these coins can be used as a currency down the  line either. Stocks can be cash alternatives,  

crypto can be, gold can be. Nothing about  the wash sale changes any of that.  

The fifth change I see this bringing about? It  will change how comfortable people are using  

excessive leverage in crypto. Those traders who  are levered by five, ten, even fifty times their  

cash position will ease up as part of the wash  sale rule hitting crypto. This, too, is a good  

thing for the crypto-sphere as a whole. Reducing leverage, reduces volatility and quite  

honestly, reducing criticism from politicians  and regulators because there aren’t these  

huge price swings. So that’s the five as I see it.  

Trading volume will reduce between now and through  tax filing time of 2023. Volatility will drop  

off which stabilizes the price. The government  confirms crypto as an asset - which is a big step  

in the right direction. And it will lessen the  amount of leverage in the crypto space.  

This is all part of the maturation process that  a new asset like crypto needs to go through. This  

isn’t a BAD thing per se. It feels more like  a necessary thing. An EXPECTED thing. No more  

excessive trading in and out. Just let  your investment sit. Let it mature. Let  

the decentralized infrastructure continue  to develop over the next two to five  

years. You still Hodling? I am! Thanks for  watching and I’ll see you on the next one!