PEPE suddenly surged 20% today, and there might be an interesting phenomenon behind it — the "loss deduction mechanism" of the US tax system is at work.

Here's a simple explanation of this logic. If you earn $10,000 from a stock in 2025, depending on your holding period and income level, you will pay between 15% and 37% income tax. But there's a loophole: if you incur a $10,000 floating loss on a crypto asset (like PEPE), as long as you sell within the same tax year, this loss can directly offset your previous stock profits. As a result, the tax payable drops from several thousand dollars to zero.

Why is this trick particularly effective now? Coincidentally, the US stock market generally rose in 2025, with big tech stocks and the S&P 500 outperforming in a bull market. Meanwhile, the overall cryptocurrency market is in a downtrend. These two opposite asset trends create a system arbitrage opportunity for savvy traders. On one side, there are unrealized gains in US stock accounts; on the other, unrealized losses in crypto accounts. Hedging both ways can maximize tax optimization.

This "tax-driven asset flow" becomes especially apparent at year-end because investors are eager to harvest losses to offset taxes. So, when seeing a rebound in crypto assets like PEPE, it might be driven by large funds engaging in cross-asset tax planning.