Cost basis of an asset bought
The acquisition cost of an asset bought is calculated as the asset's fair market value (FMV) at the time of the transaction.
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 of the transaction. If the price of BTC is $20,000, the cost basis for 25 ETH acquired becomes $40,000.
Cost basis of an asset sold
The acquisition cost of an asset 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, such as the UK and Canada.
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?
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