An oracle that supplies asset prices used by protocols to value collateral, determine borrowing limits, or trigger liquidations.
Oracle prices decide when your collateral is liquidated and at what terms. For tax, the liquidation is a disposal at the protocol's execution, so the oracle indirectly sets your proceeds. Oracle manipulation losses are investment losses, generally capital.
The liquidation is a realized disposal, so any loss against basis is a capital loss. Whether you also have a recoverable claim does not change the tax on the disposal.
Source: IRC 1001; IRC 165
Last reviewed September 18, 2026. Tax rules change; confirm current law before acting.
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