Assuming some multi-year held Bitcoin (or ETH) with capital gains, what resources or strategies might somone consider to earn yield on those holdings without selling and being required to pay taxes on those capital gains? Please assume United States law and that not reporting and paying is not an option.
One could take BTC and put it in a BTC Curve pool and then take those tokens and put them in the Yearn BTC vault. But it is my understanding that even converting BTC to wBTC, renBTC, or sBTC, for example, would constitute a sale and require payment of taxes on the capital gains. Even if that was not a sale, the IRS would likely consider depositing that token for a Curve pool token to be a sale. And it would likely be another sale to get into the Yearn BTC vault. If and when Curve and Yearn create ETH pools/products, there would be similar issues with using ETH with embedded gains.
I know defi has been concerned about tokenizing everything, but if there is an option, there could be a big market for earning yield without “selling” for a token. I am not suggesting that the yield would avoid taxes or that the capital gains would never be subject to taxes.
There must be people on this forum who have considered the tax consequences of using BTC or ETH aquired several years ago.