tl;dr– That is referred to as a capital loss. You are stated to understand the capital loss in the event you promote the Bitcoins on the cheaper price, such that you just misplaced cash as a result of having purchased/offered them. Nevertheless, observe that this is not authorized recommendation and I am uncertain about what the present authorized statutes are surrounding Bitcoin.

Bitcoin’s a capital asset (a minimum of conceptually; dunno about legally):

A capital asset is outlined to incorporate property of any sort held by an assessee, whether or not related with their enterprise or occupation or not related with their enterprise or occupation. It consists of all types of property, movable or immovable, tangible or intangible, mounted or circulating. Thus, land and constructing, plant and equipment, motorcar, furnishings, jewelry, route permits, goodwill, tenancy rights, patents, logos, shares, debentures, securities, items, mutual funds, zero-coupon bonds and so on. are capital property.

–“Capital asset”, Wikipedia [links omitted]

When a capital asset appreciates in worth, it is referred to as a capital acquire, and could also be topic to capital positive aspects tax. And when a capital asset depreciates in worth, it is referred to as a capital loss (and typically ends in a diminished tax burden).

Till you truly promote the Bitcoins, the loss is taken into account unrealized:

What’s an ‘Unrealized Loss’

An unrealized loss is a loss that outcomes from holding onto an asset after it has decreased in value, fairly than promoting it and realizing the loss. An investor might want to let a loss go unrealized within the hope that the asset will ultimately get better in value, thereby a minimum of breaking even or posting a marginal revenue. For tax functions, a loss must be realized earlier than it may be used to offset capital positive aspects.

–“Unrealized Loss”, Investopedia [links omitted]

When you do promote the Bitcoins, then you understand how a lot cash you have gained/loss. That is referred to as realization:

DEFINITION of ‘Realized Loss’

A loss is acknowledged when property are offered for a value decrease than the unique buy value. Realized loss happens when an asset which was bought at a degree known as value or e book worth is then disbursed for a price beneath its e book worth. Though the asset might have been held on the stability sheet at a good worth degree beneath value, the loss solely turns into realized as soon as the asset is off the books.

–“Realized Loss”, Investopedia [links omitted]

Abstract

In the event you purchase Bitcoins they usually depreciate in worth, then:

• You have suffered a capital loss.

• Earlier than you promote the Bitcoins, it is an unrealized capital loss.

• After you promote the Bitcoins, it is a realized capital loss.