What is the impact of using FIFO, LIFO, and HIFO in cryptocurrency trading?

3 answers

• Nov 26, 2021 · 3 years ago
  Using the FIFO method in cryptocurrency trading means that the assets purchased first are sold first. This can have an impact on the calculation of gains and losses, as it may result in different cost bases for different assets. Additionally, FIFO can affect tax obligations, as the sale of specific assets may trigger different tax implications. From a trading strategy perspective, FIFO can be useful for long-term investors who want to prioritize holding assets for a longer period of time.
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• Nov 26, 2021 · 3 years ago
  On the other hand, the LIFO method in cryptocurrency trading means that the assets purchased last are sold first. This can also impact the calculation of gains and losses, as it may result in different cost bases compared to FIFO. LIFO can have different tax implications as well, depending on the specific assets sold. In terms of trading strategy, LIFO can be beneficial for short-term traders who want to prioritize selling assets quickly and potentially taking advantage of price fluctuations.
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• Nov 26, 2021 · 3 years ago
  As for the HIFO method, it involves selling the assets with the highest cost basis first. This can impact the calculation of gains and losses, as it may result in higher cost bases for assets sold. HIFO can have different tax implications, as the sale of high-cost assets may trigger higher tax obligations. In terms of trading strategy, HIFO can be useful for minimizing tax liabilities and potentially maximizing overall gains.
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