Bits + Bips: Crypto Investing Is About Managing Risk, Not Chasing Upside - Ep. 978

What It Covers

Shihan Chandrasekara from CoinTracker and Sebastian Derevo from Steakhouse Financial discuss year-end crypto tax strategies, wash sale rules, DeFi risk management, and the evolving landscape of tokenized credit and stablecoin lending protocols.

Key Questions Answered

• •Tax Loss Harvesting: Sell crypto assets below cost basis before year-end to realize losses that offset capital gains with no dollar limit, or claim up to three thousand dollars against ordinary income if no gains exist, with excess losses carrying forward to future tax years.
• •Crypto Wash Sale Loophole: Unlike stocks requiring thirty-day waiting periods, crypto wash sales remain legal under current IRS rules since digital assets classify as property not securities, though transactions must demonstrate economic substance beyond tax avoidance to withstand potential audits.
• •Exchange Tax Reporting Changes: Starting 2025 tax year, centralized exchanges issue Form 1099-DA showing only proceeds without cost basis, requiring investors to maintain separate records. Full cost basis reporting begins 2026 but only covers transactions occurring entirely within single exchanges.
• •DeFi Risk Management Philosophy: Steakhouse Financial prioritizes institutional-grade vaults with lower risk profiles, arguing one percent additional annual yield proves worthless with ten percent probability of total capital loss. Prime vaults track Treasury bill rates plus or minus fifty to one hundred basis points.
• •Tokenized Credit Complexity: Private credit products like Fazanara MF1 accrue interest daily but mark down losses only when fund administrators require provisions, creating price charts that appear stable until sudden drops occur, unlike liquid high-yield ETFs with continuous price fluctuations.