What are the potential risks and drawbacks of using the Last In First Out (LIFO) method in managing a cryptocurrency portfolio?

1 answers

• Mar 22, 2022 · 3 years ago
  At BYDFi, we understand the potential risks and drawbacks of using the Last In First Out (LIFO) method in managing a cryptocurrency portfolio. While LIFO may be a commonly used method in traditional finance, it may not be the most suitable approach for cryptocurrencies. One of the main drawbacks is that it can result in higher tax liabilities, as selling the most recently acquired cryptocurrencies first may lead to higher capital gains taxes. Additionally, using LIFO may not accurately reflect the true performance of the portfolio, as it may not consider the average cost basis of the cryptocurrencies held. At BYDFi, we recommend considering alternative portfolio management strategies that take into account the unique characteristics of cryptocurrencies and the potential tax implications.
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