Research Report
Tax-Loss Harvesting Benefits for Digital Assets
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November 13, 2023

Tax-loss harvesting is an investment strategy in which assets are sold at a loss, and the losses are used to offset taxable capital gains from other investments. 

Tax-loss harvesting is an established method for reducing tax burdens and potentially enhancing investment earnings in traditional investment portfolios. The benefits of tax-loss harvesting can also be realized for digital assets when utilizing an SMA structure. Having an efficient strategy in place for tax optimization is especially important for digital assets, given the relatively high levels of volatility. 

The Top Benefits of Tax-loss Harvesting for Digital Assets

+ Turn volatility into an opportunity: As an emerging asset class, bitcoin and digital assets experience high levels of volatility. By utilizing tax-loss harvesting, advisors can reduce the impact of this volatility on their clients' portfolios while maintaining a long-term allocation to digital assets. 

+ Automation: With digital asset SMAs, the tax-loss harvesting process is automated, increasing the benefits of tax-loss harvesting without any extra work for the advisor.

+ Reducing taxes: Tax-loss harvesting can reduce the amount owed in capital gains when filing taxes. If there are no gains in the same tax year, carry-forward losses can be used in future years.

+ Growing the portfolio long-term: Reinvested tax savings will compound over the life of the investment, which could be a significant benefit for digital assets over the long term.

Digital assets represent a long-term opportunity in a diversified portfolio. By utilizing digital asset SMAs, advisors can tap into the benefits of tax-loss harvesting with minimal setup and ongoing automation. Clients will benefit by maintaining their long-term allocation to digital assets, limiting the impact of volatility, and potentially reducing their tax burden.


This is presented for informational purposes only and has not been verified by a qualified tax or legal professional and should not be relied upon as legal or tax advice. Eaglebrook is an investment advisor and is not licensed or permitted to provide legal or tax advice.  Please consult your CPA or tax attorney for advice on taxability of digital assets. Or, for more information on the tax treatment of property transactions, please see, where the Internal Revenue Service provides several publications, including Notice 2014-21 and Publication 544, Sales, and Other 7 48022522.8 Dispositions of Assets. Where some digital assets are treated for tax purposes as property, the wash-sale rule presently does not apply, but that is subject to change.  Some digital assets such as bitcoin and ether are treated by the Internal Revenue Code as property and as such general tax principles applicable to property transactions apply to digital asset transactions.For important information about Eaglebrook Advisors and the services we offer, please see our Form ADV and Form CRS at Please review our Privacy Policy for information on the use and protection of your personal information.The information contained in this email is intended only for the person or entity to which it is addressed. This email contains proprietary, confidential and/or privileged material, if you are not the intended recipient of this message, any use, dissemination, or reproduction is strictly prohibited. If you received this in error, please contact the sender and delete the email and its attachments immediately. The contents of this email may be protected by copyright law. Any authorized use or disclosure of its contents is strictly prohibited.

About Eaglebrook Advisors
Eaglebrook is a tech-driven investment manager specializing in bitcoin and digital assets. The firm offers various Bitcoin and Digital Asset SMAs serving financial advisors, registered investment advisors (RIAs), family offices, and institutions. Eaglebrook is backed by wealth management executives and institutions.
For more information, please contact us at +1 (202) 798-1880 or send an email to