Capital Loss

Definition ∞ Capital loss occurs when a digital asset is sold for less than its acquisition price. This financial event represents a reduction in the initial investment value upon the disposition of a digital asset. It is calculated as the difference between the asset’s cost basis and its selling price. Capital losses are significant for tax reporting, as they can be utilized to offset capital gains or, in some jurisdictions, a limited amount of ordinary income.
Context ∞ News related to cryptocurrency often highlights capital losses experienced by investors during market downturns, impacting their overall portfolio performance. Tax regulations surrounding digital assets, including the treatment of capital losses, remain a prominent area of discussion and legislative development globally. Understanding these implications is crucial for investors and financial planners alike.