Definition ∞ Capital Losses occur when an investment is sold for a price lower than its original purchase cost. This represents a reduction in the initial principal amount invested in an asset. Such losses are a common aspect of financial markets, affecting investors across various asset classes. They are typically realized upon the disposition of the asset.
Context ∞ The tax treatment of capital losses is a significant consideration for digital asset investors, as these losses can often be used to offset capital gains from other investments. Regulations surrounding the reporting and deductibility of cryptocurrency capital losses vary by jurisdiction, creating complexities for individuals and institutions. Understanding these rules is crucial for accurate financial planning and tax optimization within the volatile digital asset market.
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