Taxes eat more than half the profits? 3 legal profit protection strategies for crypto whales
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Taxes eat more than half the profits? 3 legal profit protection strategies for crypto whales
Wealthy investors rarely sell cryptocurrency directly.
Navigating Web3 tides with focused insightsBy: JetStart
Translated by: Chopper, Foresight News
If you sell cryptocurrency the wrong way, over half your profits could go straight to taxes. Imagine earning $200,000 and having to hand $110,000 directly to the IRS. Here’s how wealthy investors legally keep their profits.
When you make big money, you face big problems. Banks will question every transaction, tax authorities will monitor your every move. Even buying a car or a house could turn into a nightmare. Without proper planning, your profits can vanish quickly.
Strategy One: Borrow Instead of Selling
Use your Bitcoin or Ethereum as collateral to borrow cash or stablecoins. This way, you unlock capital without touching your holdings.
Example: $1 million in Bitcoin, at a 30% loan-to-value ratio, allows you to borrow $300,000. You maintain your position while accessing tax-free funds.
The reason this works is simple: loans are not considered income.
When you borrow, the IRS does not treat it as a taxable event. Your cryptocurrency remains under your control, avoiding capital gains tax.
Majors use low loan-to-value ratios to borrow safely.
Strategy Two: Relocate Before Selling
Different countries have different tax rules for cryptocurrency gains. Moving to one of these locations before cashing out could save millions in taxes.
Popular choices include Puerto Rico (under Act 60, 0% tax rate) and the UAE (no income or capital gains tax).
Strategy Three: Use Offshore Entities
Establish a company in tax-free jurisdictions such as the Cayman Islands, British Virgin Islands, or Seychelles. Hold cryptocurrency through the company rather than personally. When the company sells crypto, your personal capital gains tax is not triggered. If structured correctly, this method is entirely legal.
You don’t need to withdraw profits personally—your offshore company can lend the funds to you. Loans are not treated as income, so no tax is due. You can use these funds to buy real estate, pay salaries, or invest.
Doing it this way offers major whales a series of benefits:
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Personal wallets remain private and harder to track.
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Bank statements show loan repayments, not taxable income.
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On-chain activity avoids direct traces of selling cryptocurrency.
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If properly structured, taxes can be legally minimized or even eliminated.
Summary
Wealthy investors almost never directly sell their cryptocurrency. They protect profits using strategies like collateralized borrowing, relocation, and offshore entities. Today, understanding these rules is more important than ever.
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