If you hold cryptocurrency for investment purposes, your gains are taxable and your losses are probably deductible, although this is a bit of a gray area.
If you are using cryptocurrency as money, you must report any gains when the cryptocurrency is converted to what the IRS considers "real" money or goods or services, but you can't deduct your losses.
Suppose someone pays you $50 in BTC for something you sold on Facebook marketplace, in February 2022, when BTC was $42,000. You actually received 0.00119 BTC. In July 2022 you buy a pizza for $10 of BTC, at today's price that's 0.000419 BTC. From the February price, that's a $7 loss. That's non-deductible. It's just gone.
On the other hand, suppose someone pays you $50 in BTC for something you sold on Facebook marketplace, in October 2020, when BTC was $10,000, that's .005 BTC. When you buy the pizza, it costs you .000419 BTC which has a present value of $10 but a cost of $4.19, which is a $5.81 taxable gain for you.
If you track cryptocurrency the way the IRS says, you have to report lots of transactions and pay income tax on every transaction with a gain, and you can't deduct transactions with a loss.
