What are some examples of LIFO and FIFO methods in cryptocurrency trading?

3 answers

• Dec 29, 2021 · 3 years ago
  In cryptocurrency trading, the LIFO method is often used when selling assets. This means that the most recently acquired assets are the first ones to be sold. For example, if you bought 1 Bitcoin at $10,000 and then bought another Bitcoin at $12,000, and you decide to sell 1 Bitcoin when the price reaches $15,000, the LIFO method would dictate that you sell the Bitcoin you bought at $12,000 first. This method can be beneficial when you want to minimize your capital gains tax liability by selling the assets with the highest cost basis first.
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• Dec 29, 2021 · 3 years ago
  On the other hand, the FIFO method in cryptocurrency trading means that the first assets you acquired are the first ones to be sold. Using the same example as before, if you decide to sell 1 Bitcoin when the price reaches $15,000, the FIFO method would dictate that you sell the Bitcoin you bought at $10,000 first. This method can be advantageous when you want to maximize your long-term capital gains by selling the assets with the lowest cost basis first.
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• Dec 29, 2021 · 3 years ago
  At BYDFi, we recommend using the LIFO method for cryptocurrency trading as it allows you to potentially reduce your tax liability. However, it's important to consult with a tax professional to ensure compliance with local tax laws and regulations. Additionally, it's worth noting that different countries may have different regulations regarding the use of LIFO or FIFO methods in cryptocurrency trading. It's always a good idea to stay informed and make decisions based on your specific circumstances.
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