Good question. In my example in the post, the first layer of tax is recognized on the 2017 tax return, the year the coins were successfully mined. The second layer of tax applies to the 2018 tax return (year when the Bitcoin is disposed of). Had the value decreased in 2018 to $1.00 on 12/31/2018 and sold at a 100% loss (instead of $100,000 I used in example), taxpayer would have still had income in year 2017 and a loss in 2018. However if the loss is capital loss, it may be limited to $3,000 per year under US individual income tax law.
Of course same with dislaimer above, this is not personal tax advice, cannot be used to avoid penalties, and is subject to new legislation after the date of this post.