Due to how the smart contracts we utilize are designed and function, there may be some significant tax implications/savings.
Under normal crypto tax circumstances, all trades between cryptocurrencies and all trades between fiat currency are taxed. Havens have characteristics that differ from standard crypto transactions.
In Havens, a token represents your assets in a periodically rebalanced portfolio. You do not rebalance assets yourself. Because your vault token is a portfolio strategy itself, the automated underlying activities such as rebalancing are not taxed.
Normally if you rebalance your portfolio, you buy, sell, and trade crypto in order to have your assets proportioned. This triggers taxes on your investments, and you may also lose out on long term capital gains treatment (holding an asset for over a year).
When you use a Haven, you are effectively exchanging one token for another (vault tokens). You have just exchanged one property for another. This transaction will result in a cap gain/loss.
But once in Havens, you are taxed on your overall capital gains from the time you initially exchanged—until the time you sold/redeemed the vault tokens. Wait a year or longer, and it’s now a long-term cap gains rate.
This is no different from how ETFs function. Gains or losses are not decided until you sell your ETF shares. Regardless of how much buying, selling, rebalancing is happening within the actual ETF.
This is why Hodlers ❤️ Havens. Volatility vaults are a long-term accumulation strategy. Hodlers can put some of their coins inside a Haven, grow their stack, all w/o worrying about the tax burden.
You think volatility is your ally
But you merely adopted the volatility
Chain Haven was born in it
Molded by it
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