Let's discuss a practical topic today: how to use crypto assets in conjunction with traditional investments for tax optimization.

Suppose Xiao Ming invests in Nvidia stock in 2025 and earns $100,000. According to the US standard tax rate of 40%, he owes $40,000 in capital gains tax. But there's a strategic move he can make—

In the same year, he buys 10 Bitcoin when the price is $10,000 each, totaling $100,000. By the end of the year, BTC drops to $9,000 each. Xiao Ming decides to sell all 10 coins, realizing a paper loss of $10,000. The key here is that, under tax law, this loss can offset his Nvidia profits:

$100,000 Nvidia profit - $10,000 Bitcoin loss = $90,000 taxable income

As a result, in 2025, he pays no tax at all, saving $40,000. Early in 2026, he buys back the same amount of Bitcoin at $9,000 each. The total number of coins remains unchanged, but through this maneuver, he effectively saves $40,000 in taxes.

This is what’s called "tax loss harvesting"—using the volatility of crypto assets to optimize overall tax burden. Of course, the prerequisite is that you have both gains from traditional assets and losses from crypto assets that can be matched.