I will first explain the steps, and then explain why this method is not a tax event for both ACCUMULATING and OFFLOADING your Bitcoin. Bonus: you also don't pay spread fees, only the miner fees from the Bitcoin network itself. Obviously, you should optimize for being able to take a Bitcoin backed loan instead of selling which I will be happy to talk about in a different post. But if you need to do this to pay for some groceries or whatever, then this method can be great.
This is for American Bitcoin users only, I don't know how it works in other countries where Strike can be used.
Remember: Bitcoin is about improving your life, not hoarding it at the cost of no life improvements at all. As long as you save more than you spend, you should not feel guilty.
Accumulating (Buying)
- Fund your Strike account with dirty fiat by making a deposit from your crusty bank or debit card. You can do this by tapping the person icon in the bottom right, then tap "Deposit". You can skip this step if you already have fiat in your Strike account.
- After funding the account, go to your home tab (house icon in the bottom left) and tap Pay.
- From the "Pay" section, tap the QR code icon in the top right.
- Now you can either scan a QR code that address for your wallet, or you can paste it if you have copied the address from your wallet. I like to use the QR code when possible. Be sure to verify the address is correct!
- That is it, now chose how much you want to send and then wait for the on-chain transaction to confirm.
- Congrats, you just sent Bitcoin to a wallet without generating a tax event.
Offloading (Selling) - The more interesting part!
- From the home tab, tap "Request".
- Tap the Bitcoin icon in the top right corner.
- Enter a note if you want, or tap the arrow button.
- You are now on the Request BTC tab. Enter in the amount of fiat you wish to request and tap Next.
- Now tap the QR code in the top right and select either Lightning or a Bitcoin network QR code address.
- From your Bitcoin wallet, scan the QR code and send the amount requested in fiat.
- Strike will take the Bitcoin and fund your account with fiat.
- This area can be confusing because it implies you'll receive Bitcoin, but you will not. Only fiat.
WTF just happened and why is this not a captial gains tax event??
This is the magic of Strike. If you use these methods instead of the "Buy/Sell Bitcoin" feature you are telling Strike "Hey, you convert this Bitcoin to dollars and send the funds out of your reserve". This is the same mechanic that allows for cross border payments.
If you do the same but using the Buy Bitcoin tab, you are converting the Bitcoin directly to fiat yourself, which is a tax event. In the outlined scenario, Strike does not care if the Bitcoin comes from your wallet, or Joe's wallet from Europe. Strike only cares that they received Bitcoin, and in exchange will send the recipient the equivalent value in fiat. This is how you can send a family member fiat that they can deposit into their bank immediately if all you have is Bitcoin.
To enable this, Strike acts as a liquidity provider. I suspect they must hold both Bitcoin and fiat in their reserves to make this happen. I also suspect this is one of the challenges of being able to open in other markets like Europe.
I believe this feature is criminally underused, but is extremely powerful and is the best way to use Strike. As I said earlier, this also avoids Strike's very tiny spread fee. The only fee you pay is the fee Bitcoin's miner fees, which is my favorite thing about all of this, since I rarely sell my Bitcoin.
As I hinted at earlier, selling should be your last resort when you can. What you really want to be able to do is take loans (big or small) using Bitcoin as collateral. I have seen a lot of negative sentiment about this but would be happy to put something together that goes into the details of risk management and also addressing the whole "not your keys" thing that gets mindlessly tossed around when the subject comes up but for now I really got to take a shit.
Stay safe fellow retards and psychopaths. ✌