Understanding Crypto Accounting: FIFO vs. LIFO Methods

Choosing the right cost basis method can significantly impact how much money you owe. Tax authorities require you to use a consistent accounting method to determine which specific coin you are selling. The two most widely used accounting methods globally are FIFO and LIFO.

What is the FIFO Method?

FIFO stands for First-In, First-Out. Under this standard, it is assumed that the very first cryptocurrency assets you purchased are also the first ones you sell or trade. It works best in a steadily declining bear market.

What is the LIFO Method?

LIFO stands for Last-In, First-Out. This method assumes that the most recent cryptocurrency assets you bought are the first ones you sell or trade. It can be incredibly powerful during a roaring bull market to legally minimize your immediate tax bill.