It’s an important point.  I addressed it by migrating most  holdings into a Bitcoin-friendly Roth IRA when prices had crashed in 2022 and I had only capital losses, not gains.  It’s not self custodied but it is Bitcoin.  I know others will disagree but it’s the choice I researched and made for myself.  Cheers. 

 I have some bitcoin via etf in a Roth and some in a standard 401k too. Fortunately, Roth came first via GBTC :)

Self custody is very important, imho, but a diversity of strategies to avoid having your coins taken from you is only wise. Tax mitigation is part of such a diverse strategy. 

 Exactly.  “Wallet diversification!” 

 I did something like this way way back in the day. I bought these things called bitbills…think casascius coins but in laminated bill form. In bitcoin terms it cost me a small fortune as price was very low and shipping wasn’t cheap. Probably cost me 5 bitcoin. 

 But, it did move bitcoin safely in to the future for me…better than the time I sent all my bitcoin to one address and wrote down the private key by hand on an envelope. This was before the whole “seed phrase” thing was invented. 

 Let’s simulate tax consequences of HODL vs. Trading. Assumption: on average, a trader will merely break even in Bitcoin terms. This is equivalent to periodically selling all bitcoins and buying them back at the same price, but having to pay tax on the gains and hence buying back fewer bitcoins. 

I also assume the trader sells every time he 10x’s the dollar value of his bitcoin holdings. I assume all gains are long term gains, where tax rate is 10% for most people or 28% for high income people. 

Long story short: such “mediocre” trading, despite such amazing returns, could cost you somewhere between slightly less than half your bitcoin and 85% of it, if you traded from bitcoin prices of $1 to $100,000. But the trader does pay less in tax…cause he has a shit ton less value at the end. 

See attached spreadsheet images. https://image.nostr.build/67196ebc333593cd1588ab86b5c8254f46ea96cc4a5be7dfaa0cd9195257b05c.jpg https://image.nostr.build/fb849241b20748759b0b15f124608d71931291e02a9dba02e95695653ed16b5f.jpg  nos.lol 

 Let’s simulate tax consequences of HODL vs. Trading. Assumption: on average, a trader will merely break even in Bitcoin terms. This is equivalent to periodically selling all bitcoins and buying them back at the same price, but having to pay tax on the gains and hence buying back fewer bitcoins. 

I also assume the trader sells every time he 10x’s the dollar value of his bitcoin holdings. I assume all gains are long term gains, where tax rate is 10% for most people or 28% for high income people. 

Long story short: such “mediocre” trading, despite such amazing returns, could cost you somewhere between slightly less than half your bitcoin and 85% of it, if you traded from bitcoin prices of $1 to $100,000. But the trader does pay less in tax…cause he has a shit ton less value at the end. 

See attached spreadsheet images. https://image.nostr.build/67196ebc333593cd1588ab86b5c8254f46ea96cc4a5be7dfaa0cd9195257b05c.jpg https://image.nostr.build/fb849241b20748759b0b15f124608d71931291e02a9dba02e95695653ed16b5f.jpg  a.nos.lol