The security has to be considered 'worthless' to qualify as a non-business bad debt. Here's more info on Non-Business Bad Debts.
IRS regulations state that a Non-Business Bad Debt is reported as a short-term capital loss, no matter how long it was held.
You may be able to apply the bad debt deduction to crypto. Here's info from Cointracker you may find helpful.
@tkoin1
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