Here’s How Crypto Traders Convert Worthless NFTs Into Tax Cuts

Crypto traders are turning worthless NFTs into tax breaks. They use a service started just for that. Others are taking advantage of IRS tax loopholes for tax breaks on losses from BTC, ETH, and others this year.

That’s how bad the crypto winter is getting as frost descends on Earth’s northern hemisphere. NFT purchasers are now helping people with their underwater smart contracts. They help sellers unload junk NFTs and obtain official receipts for tax breaks.

Investors are losing money on NFTs due to tax cuts

Just like what happened after the 2008 financial crisis. At the time, billions of dollars in mortgage-backed securities (MBS) had become toxic. They were unloaded for big tax breaks. Banks and financial institutions caught in the then innovative derivatives market were bailed out.

But it’s nothing like what happened after the 2008 financial crisis. Because it was governments and central banks that bought most of those toxic assets. It was something of a big institutional relief for the banks that suffered losses in that decade-long mortgage bubble.

Cryptocurrency creativity keeps the wheels spinning

Instead, the free market and entrepreneurship are once again pervasive with the loss-stricken NFTs.Buyers of NFTs have emerged to solve the problems created by the free market and entrepreneurship. It fits in with the spirit of the cryptocurrency sector and the freedom of the free and open Web3 Internet. Plus, it’s federally friendly as it has tax deductions.

The Guardian reported Thursday that:

Now, along with the broader cryptocurrency market, the demand for NFTs has declined so much that people are opting to sell their once-valuable “digital collectibles” as tax losses to offset their income taxes. A market has emerged specifically for the collectors you are considering. ”

Offloading unsold NFTs is not the only way crypto investors are getting tax relief from this brutal crypto winter loss. They also sell unrealized losses and hold long positions for future upside while buying back to realize losses for tax purposes.

How Crypto Traders Get Other Tax Cuts

A tax loophole is that cryptocurrencies are considered assets rather than securities. As such, the 30-day stock wash rule does not apply. This means that if you are holding a position at a loss, you can sell the position and buy it back to hold your losses against your gains and reduce your tax liability from your crypto investments.

Microstrategy took advantage of tax cuts through this loophole in the fourth quarter of 2022, according to a recent filing. The Michael Thaler-led company amassed an additional $42.8 million in BTC from early November until near the end of December, but sold about $12 million for tax purposes during that period.