Oddbean

One reason I'm selling some bitcoin right now: As a US citizen the long term capital gain rate for my status is $44,625 at 0%. If I do not take advantage of this, it's wasted. So for example if I want to buy a house in 3years for $300,000 worth of bitcoin, I pay a lot of long term capital gains tax on that in the future when I want the house. But if instead, in these years while I'm waiting, I sell $44,625 of bitcoin, take the 0% capital gain tax, and then immediately re-purchase the bitcoin, it adjusts my cost basis up by $44,625 per year. If I do this for 3 years, then when I'm ready to buy my house in 3 years, I have $133,875 of added cost basis, saving me 15% (or more) tax on all that. If instead I ignore this opportunity and just hodl until I need the $300,000 I will pay dramatically more taxes. Something to think about.

But, like, even considering the extortion, wouldn't it be better to only sell when you really need it, instead of keeping fiat money idling in the bank where it will lose way more than 15% of its purchasing power in three years? Bitcoin on the other hand will appreciate way more than 15% in three years.

I don't think you fully understood what I was describing. My selling and the immediately buying back you harvest the capital gain rate of 0% but lose no purchasing power of your bitcoin. Your money never even touches a bank. You simply move $45,000 of bitcoin to an exchange, sell it, buy it back, and withdraw it

You are right then, I did not understand, nor I am sure I do now though. Do you mean that by selling and immediately buying again, you reset the capital gain so that, when you sell it again in the future, it will be calculated on the second purchase price, hence taxation will be on a lower amount?

That's correct. It's important to understand the tax brackets on long term capital gains. The first $47,000 of long term capital gains (in the US) is taxed at 0%. So by selling that amount of bitcoin, you realize a gain, but it's a 0% taxed gain. Then when you buy back, your cost basis is set to the new purchase price. When you eventually sell you are taxed from the new tax basis. It's a way to protecting $47,000 a year from taxes, every year.