Taxing realized gains has its merrit too. Important, I am talking about liquid securities rhat can be sold (to pay tax). Ver important premise.
Taxing realized gains has the disandvantage that tax revenues are very unpredictable YoY, that there was a major incentive to let existing positions run (which impacts efficiency of capital allocation), that it can become something like a hidden inheritance tax and that less educated (Investment wise) people pay signifficantly more tax than smart ones (that push the tax bill down the road to the extent they can). It further incentivizes leverage, which impacts financial stability.
The only disadvantage from taxing unrealized gains is that taxes are due every year and therefore compound. But this can (and has to) be addressed by applying a lower tax rate. Once the tax rate was reduced so that it mimics the tax rate X duration of a tax on realized gains, there is no disadvantage. People just need to liquidate some of their liquid position to pay the bill (remember - liquidity is key here). At a larger sceme, that liquiditation is actually very important as it serves as a balancing and stabilizing factor to investments. People are incentivized to sell a bit if shares grow heavily - and given the tax reduction leading to potentially no income tax at all as we face a crash, people are incentivized to invest as shares are cheap. So the taxation system supports the overall stability of the financial system.
IF calibrated so that total tax revenues are the same, meaning tax rate on unrealized gains was lower than rate on realized gains… taxing unrealized gains clearly beats the alternative, both on an individual, spciety and financial markets/stability level.