Why you should never sell your Ethereum?

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Ethereum

  • Ethereum, is the third cryptocurrency created after Bitcoin and Litecoin.
  • Ethereum is the cryptocurrency token you need to pay for any transaction on the Ethereum blockchain, this fee is called a transaction fees and sometimes refer to as gas.
  • The price of Ethereum has risen steadily in value from a few cents to thousands of dollars, and at one time was $4000.00 dollars USD per token.
  • So Ethereum is a valuable asset to own, but you need money to eat, so what options do have besides selling?
  • At this point your probably wondering How else can
  • Sometimes when I am wondering what the best choice is I ask myself, what would I do if I was rich and had the very best tax advisors? I would find a way to take cash out which didn't generate a taxable event and didn't involve losing the asset.
  • One very smart way to do this is to take out a loan on the asset.
  • Why? a loan, in general, is not considered income, therefore it is not taxable.
  • And while you do use the asset as security for the loan, unless you default on the loan, you aren't selling the asset.
  • And if structured as a business loan, the interest is actually tax deductible.
  • Wow... consider this
  • You get access to some of your gains, you don't pay taxes, you keep the asset and you generate tax dedductions to reduce your taxabvle income.
  • Sweet.

So do millionaires actually do this?

  • What do Jeff Bezos, Elon Musk and Bill Gates have in common?
  • All three were billionaires, who became famous on some random year for not paying much in taxes.
  • And in each case they did this by applying this strategy or some variation of it, to fit their particular circumstance.
  • These billionaires are considered asset rich and cash poor. This is a quaint little English idiom, which unlike most idioms is quite literal in it's meaning.
  • These billionaires don't get paid much in cash, they get paid mostly in stock or stock options to be more precise.
  • Thus they have large Net Worths as in they are worth billions of dollars, but their net worth is mostly in what are called unrealized gains.
  • One example of Unrealized gains is an assets you own, which have gone up in value, and you have chosen not to sell them.
  • So just like the Bitcoin Millionaire who has 1000 Bitcoin worth 30,000 a piece, who bought it at 1 dollar, and has has unrealized gains of 29,000 per Bitcoin, on 1000 Bitcoin, these billionaires don't want to sell their stock, because the tax owed would be very great.
  • Instead these rich people take out loans to provide cash for their rich, luxurant lifestyles.

This is why you should never sell your Ethereum

  • Instead of selling it, and realizing all those unrealized gains, you take out a loan on it.
  • You get cash, you get tax deductions, and you get to keep your Ethereum.
  • What are the actual mechanics of this? Thats the content for my next article.

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Stability is a fundamental problem on the Ethereum network, which means it often faces very high network congestion and transaction fees during times of high demand. Therefore, it's important to consider certain aspects of the cryptocurrency both in the short and long term. Additionally, Ethereum recently underwent an update that caused many miners to stop mining the cryptocurrency, highlighting the need to carefully weigh the potential benefits and risks of investing in it.

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I understand your concerns. I use to mine Ethereum and felt betrayed by the proof of stake conversion, and what I feel is the centralization of staking.

The irony of the proof of stake set-up is that many people didn't choose to stake their own Ethereum, and instead use a commercial service. This concentrates staking is the equivalent of the concentration of power in the hands of few.

This is the anthesis of decentralization.

However I try to keep my politics separate from my investments. I think new money will invest into Bitcoin and Ethereum.

Additionally, I like the lack of third party risk in borrowing against Ethereum on the Makerdao, versus using wrapped Bitcoin. But your points are valid and I shall consider them carefully.

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I don't really have much ETH but I am earning a little bit of it over at Publish0x. I guess that will probably be all the ETH I have and I think it will be successful. However, I don't think it will be the decentralized thing that Vitalik wants but rather more something that attracts all the VCs.

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I agree that Ethereum has started to look more centralized instead of decentralized with the new POS. Ironically people are not staking their own ETH or few stake their own ETH, most use one of three commercial staking services and many YouTube Cryptoinfluencers promote these services. This has resulted in the concentration of the majority of Ethereum in three services. This is the opposite of the decentralization ethereum is famous for...

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That's what they wealthy too, they hardly sell their assets and most of their well is illiquid. Just put out the asset as collateral and get a loan to do what you want to do.
Great article and simple explanation :)

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It is wise to borrow money as a loan and not pay taxes on it. Taxes are one of the major drawbacks of building your wealth.

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I agree. I have read that concentrating on reducing taxes legally by restructuring the way your income is produced.

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A good strategy I planned to use should the opportunity arises. I've even left instructions for my kids on how to use my/their hard assets to acquire funding without giving up possession of the hard or digital assets.

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Thank you. It is very wise to leave a detailed plan for your kids. People tend to liquidate all the assets of the dead, and frequently at a discount.

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