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Why do I have gains on my stablecoins?
Why do I have gains on my stablecoins?
Written by Eivind Semb
Updated over a week ago

By default, Coinpanda will value all transactions involving stablecoins using the fiat value of the stablecoin. This means that transactions involving stablecoins, as long as you don't have any negative balance warnings, should not result in any significant capital gains on the stablecoins disposed of.

However, if you change the stablecoin setting to off, Coinpanda will calculate the acquisition cost (cost basis) for an asset bought from the price of the asset sold by default. This means that if you are trading one coin for another, and we don't have prices for the coin sold, the cost basis for the coin bought will be zero (or equal to the fee in case you paid a fee). This can result in unnatural high gains when you later sell the coins that were bought. Let's look at an example:​

  • January 15: 200 USDC → 1000 ABCDE

  • February 18: 1000 ABCDE → 200 USDT + 0.0025 ETH fee

  • February 25: 200 USDT → 0.015 ETH

Since the token ABCDE is not supported and we don't have any price data, the cost basis value of 200 USDT acquired on February 18th is equal to the fee value. As a result, when the 200 USDT is sold at a later time, the capital gains will be calculated with a very low (or zero) cost basis, which in this example equals $4.22. This is why we have a realized gain of $195.78 for USDT sold on February 25th, as seen in the screenshot below:

What is important to notice is that the 1000 ABCDE sold on February 18th does realize a capital loss of $201.00 since the proceeds value is zero due to missing price data for ABCDE. As a result, the gain for USDT sold on February 25th is canceled out by the loss from ABCDE sold on February 18th.

In other words, the net gain is NOT affected by the fact that price data for ABCDE is missing.

Let's understand this better by replacing ABCDE with (CRO) token that we do have price data for:

Example 1 - ABCDE

  • February 18: $201.00 loss

  • February 25: $195.78 gain
    = $5.22 net loss

Example 2 - CRO

  • February 18: $121.23 loss

  • February 25: $116.01 gain
    = $5.22 net loss

As we can see, the net gain/loss in both examples is the same! This means that your net gains are NOT affected by the fact that you might see high capital gains for stablecoins like USDT and USDC if you decide to turn the setting for prioritizing stablecoin prices in the calculations off.

Can I avoid realizing gains on stablecoins?

The easiest way to avoid realizing gains on stablecoins is to ensure the setting for prioritizing stablecoin prices is set to on.

But keep in mind that you might still realize gains on stablecoins if you are selling more units of the currency than you have bought prior. For more information, refer to the help article about negative balance warnings.

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