Cost basis can refer to two different things:

  1. The acquisition cost of a coin/asset bought

  2. The acquisition cost of a coin/asset sold

Cost basis - coin/asset bought

The acquisition cost of a coin bought is calculated as the fair market value (FMV) of the coin/asset sold.

Example 1

4000 USD → 1 BTC

The cost basis for 1 BTC acquired is $4,000.

Example 2

2 BTC → 25 ETH

The cost basis for 25 ETH acquired is the FMV of 2 BTC at the time when the transaction happened.

Cost basis - coin/asset sold

The acquisition cost of a coin sold is calculated according to the selected cost basis method. In most countries, the default calculation method is First-in First-out, also referred to as FIFO.

There are special rules for calculating cost basis in certain countries like the UK and Canada for example.

We have written several in-depth guides about this topic. We recommend starting with this guide to learn more: Cryptocurrency Tax Calculations: What is FIFO, LIFO, and HIFO?

Read also:

Did this answer your question?