• Sep 24, 2025

Guide to Crypto Cost Basis (FIFO, LIFO and Specific Identification)

If you've bought the same cryptocurrency multiple times, there's an important question when you eventually sell it:

Which purchase does the sale relate to?

That's what cost basis helps determine.

Cost basis is generally the amount you paid to acquire an asset, adjusted where applicable for transaction costs and other relevant items. It is used to calculate your gain or loss when you dispose of the asset.

A simple example

You buy 1 BTC for $30,000.

Later, you sell it for $45,000.

Your gain is:

$45,000 − $30,000 = $15,000

But imagine you've bought BTC several times:

• 1 BTC at $30,000
• 1 BTC at $35,000
• 1 BTC at $40,000

You then sell 1 BTC for $45,000.

Which purchase should be used?

That's where cost basis methods come in.

There are different ways to determine which acquisition lot is matched with a disposal.

FIFO

FIFO means First In, First Out.

The earliest acquisition is matched first.

LIFO

LIFO means Last In, First Out.

The most recent acquisition is matched first, where applicable under the relevant tax rules.

Specific Identification

Specific Identification allows particular units/lots to be identified when the applicable rules and documentation requirements are satisfied.

The important takeaway is that the method can change the cost basis assigned to a sale and therefore change the resulting gain or loss.

Why acquisition dates matter

Cost basis isn't just about the purchase price.

The acquisition date can also be important because tax rules may depend on how long an asset was held.

For this reason, good records should ideally show:

• What asset was acquired
• How much was acquired
• Purchase price
• Acquisition date and time
• Transaction fees
• Where the asset was acquired

The more complete the records, the easier it is to establish the correct cost basis later.

What happens when crypto moves between wallets?

Moving crypto between wallets you control doesn't necessarily mean you've disposed of the asset.

For example, you buy 1 BTC for $30,000 and later move it from an exchange to your hardware wallet.

The BTC still has its original acquisition history.

The important thing is that the transfer doesn't break the connection between the original purchase and the asset you eventually sell.

This becomes particularly important when assets move through multiple wallets or exchanges over several years.

What if you've lost the exchange where you bought the crypto?

Losing access to an old exchange doesn't automatically mean your cost basis disappears.

You may still be able to reconstruct the acquisition history using available records such as:

• Historical exchange statements
• CSV transaction exports
• Wallet records
• Bank or payment records
• Blockchain transaction history

The objective is to establish a reasonable, supportable history of how and when the asset was acquired.

What about a wallet migration?

Wallet migrations can create another record-keeping challenge.

You may move your crypto from an old wallet to a new wallet, but years later only the new wallet is connected to your tax software.

Without the older transaction history, the software may not know when or at what price the crypto was originally acquired.

This is why keeping historical wallet records is important even when you no longer use the wallet.

Cost basis after receiving crypto

Not all crypto enters your portfolio through a simple purchase.

You might receive crypto through activities such as staking, rewards, airdrops or other transactions.

The tax treatment and resulting basis can depend on how and where you received the asset.

This is one area where you shouldn't assume that every token appearing in your wallet has the same cost basis treatment.

The cost basis record you want to have

A useful way to think about crypto cost basis is as a chain:

Acquisition → Holding → Transfers → Disposal

You want to be able to trace the asset through that chain.

If you bought 1 BTC for $30,000, moved it between three wallets and eventually sold it for $45,000, the underlying acquisition should remain identifiable despite those wallet movements.

Final takeaway

Cost basis is more than just the price you paid for crypto.

It's the record that connects an acquisition to a later disposal and determines how your gain or loss is calculated.

FIFO and Specific Identification are two approaches that may be relevant depending on your jurisdiction. But whichever rules apply, the foundation is the same:

Keep complete records of how your crypto was acquired, where it moved, and when it was sold.

When those records are clear, calculating gains becomes much easier.