IMPORTANT: I'm not a tax professional, I'm simply doing my best to relay what is logically the case given the current rules for crypto. Please consult a tax professional before making important decisions about your investments. Also, make sure to think through things like long term capital gains tax benefits and your other tax liabilities before taking any action. Tax-loss harvesting only makes sense in very specific situations!
In simple terms, if you quickly trade out of the crypto you are in and then back into it, you realize profits / losses at that point.
Thus, if you had crazy gains early in the year, then went back into crypto and now have losses on paper because you HODL'd, you can offset your gains (and thus reduce or eliminate your tax liability for the year) with the click of a few buttons.
That may seem absurd, but logically this is what the rules say.
It doesn't work like this with stocks, because securities specifically have a 30 day "wash sale rule," but since cryptos aren't defined as securities in the eyes of the IRS (they are defined as investment property), it logically does work this way for crypto… and thus without a 30 day rule, there is no rule, and thus an immediate trade back and forth should work to realize a profit/loss in theory.
All that said, I'm not a professional tax attorney and I can't give you tax advice.
Consider, you didn't hire me to do your taxes, I'm not trained to do your taxes, etc.
All we have here is me researching crypto tax stuff and sharing it with you via a website that does free-to-access informational online content.
So, if you need to tactically take losses to offset gains, you should 100% think it through and consult a professional.
Ex of tax-loss harvesting: I made $10k in early 2018 trading altcoins. I then traded into Ethereum and HODL'd for the rest of the year. By the end of the year I had lost all $10k of my profits from 2018 on paper by HODLing Ethereum. Given my realized gains from trading alts but my losses on paper, on Dec 31 2018 I quickly traded my ETH to BTC and then back to ETH in the span of 1 minute (after running my plan by my CPA). In doing this I realized my $10k loss. That loss offset my $10k gain from earlier in the year, and thus I had a $0 profit/loss for crypto 2018. This was better than owing taxes on my $10k gain, given my $10k worth of losses on paper. Had I had additional losses or gains from other capital investments, or had some of losses came from ETH I held over a year, I might have adjusted my strategy… after-all, tax situations can be complex, and this is only one tool in the tool belt.
Carryover rules: You can only carry forward $3k worth of capital losses a year. Thus, it will rarely make sense to take more than $3k worth of losses in a year on purpose. Learn more about carryover capital losses.