Bitcoin Falls, Crypto Stocks Plummet: Tax-Loss Madness!

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Markets

What to know:

  • Bitcoin was lower by a bit more than 1% to just below $88,000 on Tuesday. 🐍💸
  • Crypto-related stocks were suffering far larger declines. Like a squirrel in a tornado. 🪂
  • Analysts suggest tax-loss harvesting and low liquidity are contributing to the action in crypto markets as the year ends. Because nothing says “end of year” like selling your losses to the IRS. 🧮
  • Some analysts remain cautiously optimistic about a potential rally, though significant recovery is not expected until liquidity returns in January. Because why wait for a miracle when you can wait for a January? 🧸

Bitcoin led crypto markets lower Tuesday, down by about 1% over the past 24 hours to just below $88,000. A true “I told you so” moment for the bears. 🦝

The decline came even as gold, silver and copper all surged to record highs (though have pulled back a bit in Tuesday afternoon trade). U.S. stocks are ahead modestly, the Nasdaq gaining 0.45%. Because nothing says “holiday cheer” like watching your portfolio melt. 🎄

Crypto-related stocks were showing far steeper declines than what the drop in bitcoin might suggest. Like a toddler on a trampoline. 🪑

The year’s worst performers – digital asset treasury companies – were hardest hit across the board. Strategy (MSTR) was down 4.2%, XXI (XXI) off 7.8%, ETHZilla (ETHZ) lower by 16% and Upexi falling 9%. Because nothing says “financial stability” like a 16% drop. 📉

Other sizable decliners included Gemini (GEMI), Circle (CRCL) and Bullish (BLSH), all off by about 6%. A 6% drop is like a slap in the face from a tax auditor. 🧾

Analysts at digital asset hedge fund QCP Capital flagged tax-loss harvesting as a potential driver of short-term action into the year-end, particularly in illiquid conditions. That means investors selling their underwater positions to realize losses, lowering their tax liabilities. Because who doesn’t want to turn a loss into a tax break? 🧾

“The end of year typically sees PMs [portfolio managers] trimming their exposure to risk assets not just with upcoming holidays but also creating taxable events and year-end balance sheets that in some cases do not want to show cryptocurrency holdings,” Paul Howard, senior director at trading firm Wincent explained. Because nothing says “professionalism” like hiding your crypto holdings. 🕵️♂️

QCP also noted the continued drop in open interest across BTC and ETH perpetual futures – falling by around $3 billion and $2 billion, respectively – has thinned leverage and left crypto markets more vulnerable to large price swings. Like a house of cards in a hurricane. 🌪️

“This vulnerability is heightened by Friday’s record Boxing Day options expiry, which represents over 50% of Deribit’s total open interest,” the firm said in a morning note. “While downside positioning has eased, the persistence of $100,000 calls suggests residual, if tentative, optimism for a Santa rally.” Because nothing says “hope” like a 100K call option. 🎁

Still, QCP expects any sharp moves to fade into the new year: “Holiday-driven moves have historically tended to mean-revert, with price action often fading as liquidity returns in January.” Because the market is a fickle friend, like a toddler with a sugar rush. 🍬

Looking ahead for the next year, Wincent’s Howard expects more consolidation without any imminent catalyst to retrace the decline from the early October highs. Because why have a rally when you can have a snooze? 🛌

“It will be many months before the asset class can retrace to a $4 trillion market cap” from the current $2.6 trillion, he said. So, grab a coffee and wait. ☕

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2025-12-23 22:39