Definition ∞ A short term loss refers to a financial loss realized from the sale of an asset that was held for a period of one year or less. In the context of digital assets, this typically applies to cryptocurrencies bought and sold within a twelve-month timeframe where the selling price is lower than the purchase price. Such losses have specific implications for capital gains tax calculations, as they are often treated differently from long term losses. This is a key consideration for digital asset traders.
Context ∞ Discussions about “short term loss” frequently appear in crypto news and tax guidance, especially around tax reporting seasons or after periods of significant market volatility. Investors who sell digital assets at a loss within a year often use these losses to offset capital gains, a strategy that news articles might explain. Understanding short term losses is important for digital asset investors to manage their tax liabilities and assess the financial outcomes of their trading activities.
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