Due to how the smart contracts are designed and function, there may be some significant tax implications/savings, depending on your jurisdiction.
Under normal crypto tax circumstances (USA), all trades between cryptocurrencies (a property) and between fiat currency are taxed. Havens have characteristics that differ from standard crypto transactions.
In Havens, a token represents your asset in a periodically rebalanced portfolio. You do not rebalance assets yourself. Because your vault token is itself a portfolio strategy, the automated underlying activities such as rebalancing are not taxed.
Normally if you rebalance your portfolio, you buy, sell, and trade 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.
When you use a Haven, you are exchanging one token for another (vault tokens). You have just traded one property for another. This transaction will result in a capital gain or loss.
But once in a Haven, you are taxed on your overall capital gains from the time you initially exchanged—until the time you sold or redeemed the vault tokens. Wait a year or longer, and it’s now a long-term cap gains rate.
This is similar to how ETFs function. Gains or losses are decided when you sell the ETF shares, regardless of the buying and selling within the actual ETF.
This is why Hodlers ❤️ Havens. Volatility vaults are a long-term accumulation strategy holders can put some of their coins inside to 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
All rights reserved. The materials on this website are for illustration and discussion purposes only. No content published on this Site or Services is intended to provide tax, legal, insurance or investment advice, and nothing should be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any asset by Chain Haven or any third party. We make no implied or express guarantee to the accuracy or completeness of the content, opinions, or ideas expressed in our Site and Services.
You alone are solely responsible for determining whether any investment, strategy, or any other product or service, is appropriate or suitable for you based on your investment objectives and personal and financial situation. We do not provide financial planning services. Investing involves risks and may result in the loss of some or all of the principal invested, you should do your own research. Past performance may not be indicative of future results.
Chain Haven © 2021