If you buy bitcoins at $10 and sell them at $100, you should be recording a capital gain. If you buy at $100 and sell at $10, record a capital loss. The losses

If you buy bitcoins at $10 and sell them at $100, you should be recording a capital gain. If you buy at $100 and sell at $10, record a capital loss. The losses can absolutely offset those gains. Generally speaking your tax agency cares much more about how much money you make than how you make that money. Unless buying/selling bitcoins is expressly illegal, treat it just like you would any other collectible (like baseball cards, sports memorabilia, etc.). This is well understood by accountants in the area. If you mine them, the price balloons to $1000, then evaporates to $0...that's another story.