When you sell a rental or business property, including a home for which you took a deduction for a home office, you incur depreciation, whether you claimed it or not.

Arizona has its own depreciation schedule. Those rules have changed over the last 5 years. The depreciation adjustment changes the depreciation from the federal form to conform to the Arizona values.

Click on the screenshot below for an explanation of changes in depreciation from the Arizona instructions.

Here is a question for the expert? Just like the IRS, Arizona considering crypto a property. Do cryptocurrency losses fall into this category in Arizona? For example, if an Arizona resident has crypto losses of $10,000 from the year 2022, does that mean the person can add the $10,000 under the Arizona Depreciation Adjustment for Property Sold?

No, you can't depreciate crypto losses. 

You aren't understanding what is meant by Arizona depreciation adjustment for Property sold. This adjustment is to reconcile the difference between federal depreciation and Arizona depreciation. 

It in no way gives you the right claim depreciation because you have a loss.