Cost Basis (Crypto)
Cost basis is what you paid to acquire a crypto asset, including fees. Capital gains tax is owed on the difference between sale proceeds and cost basis, so accurate records of every purchase are essential.
Every disposal — selling to fiat, swapping coin-to-coin, or spending crypto on goods — is a taxable event in the US, UK, Canada, and Australia, measured against cost basis. Jurisdictions differ on the accounting method: specific identification or FIFO (US), share pooling (UK), adjusted cost base averaging (Canada).
DCA buyers accumulate many small lots at different prices, which makes record-keeping (or portfolio-tracker software) non-negotiable before the first sale.
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Related terms
- Stablecoin
- A stablecoin is a cryptocurrency designed to hold a fixed value, usually $1, by being backed with reserves (cash, T-bills) or algorithmic mechanisms. They function as the cash leg of crypto markets.
- HODL
- HODL — born from a 2013 forum typo of 'hold' — means keeping cryptocurrency through volatility rather than trading it. It describes a long-term buy-and-hold strategy, often paired with dollar-cost averaging.