What are the alternatives to the highest in first out cost basis method for determining the cost basis of cryptocurrency holdings?

3 answers

• Nov 23, 2021 · 3 years ago
  One alternative method to determine the cost basis of cryptocurrency holdings is the average cost basis method. This method calculates the average cost of all the units of a particular cryptocurrency that you own. It is calculated by dividing the total cost of your holdings by the total number of units. This method can be useful when you have made multiple purchases of the same cryptocurrency at different prices. However, it may not be suitable for all situations, especially if you have made significant purchases at different times and prices.
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• Nov 23, 2021 · 3 years ago
  Another alternative method is the specific identification method. This method allows you to choose which specific units of a cryptocurrency you are selling when you make a transaction. By identifying the specific units, you can determine the cost basis based on the purchase price of those units. This method can be beneficial if you want to optimize your tax liabilities by selecting units with a higher or lower cost basis. However, it requires careful record-keeping and may not be practical for large-scale cryptocurrency traders.
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• Nov 23, 2021 · 3 years ago
  BYDFi, a popular cryptocurrency exchange, offers a unique alternative method called the weighted average cost basis method. This method takes into account the different prices and quantities of the cryptocurrency units you hold. It calculates the weighted average cost per unit based on the quantity and price of each transaction. This method can provide a more accurate cost basis calculation, especially for traders who make frequent transactions at varying prices. However, it is important to note that this method is specific to BYDFi and may not be available on other exchanges.
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