>When you're facing massive capital gains taxes, and have an inkling that those gains will turn to losses, the idea of lending out the asset, spending the cash without incurring tax, then getting the asset back starts to look attractive.

The better strategy (and the one used by the super rich) would be to borrow against the asset, as the loan isn't taxed. And if the lender's only recourse is your collateral, then you're insured against the cryptocurrency's collapse.

With the strategy you've described, you're still keeping a long position in the cryptocurrency, and have increased its volatility.