When you buy Bitcoin, Ethereum, or any other cryptocurrency, the crypto cost basis, the total amount you spent to acquire a crypto asset, including fees and taxes. Also known as acquisition cost, it's the number that decides how much you owe the IRS—or how much you actually made. It’s not the price you see on your app’s homepage. It’s not the price when you sold it. It’s the exact dollar amount you paid to get it in your wallet, down to the cent.
Tracking your crypto cost basis, the total amount you spent to acquire a crypto asset, including fees and taxes. Also known as acquisition cost, it's the number that decides how much you owe the IRS—or how much you actually made. isn’t optional if you’ve traded, sold, or swapped tokens. The IRS treats crypto like property, not currency. That means every time you sell Bitcoin for USD, trade ETH for SOL, or even use crypto to buy a coffee, you trigger a taxable event. And without knowing your cost basis, you can’t calculate your capital gain or loss. You might end up paying taxes on money you never actually made—or worse, getting flagged for underreporting.
People think cost basis is just for big investors, but it matters whether you bought $100 of Dogecoin in 2021 or $10,000 of Ethereum in 2023. If you used a DEX like Uniswap, bought on Binance, or got tokens in an airdrop, you still have a cost basis. Even if you got tokens for free, like in the Impossible Finance x CoinMarketCap airdrop, the IRS assigns a value based on market price at receipt—and that becomes your new cost basis. Miss that, and you’re guessing your taxes.
What makes this messy? Multiple purchases. You don’t buy all your Bitcoin at once. You buy a little here, a little there, sometimes at $30K, sometimes at $60K. Then you sell 0.5 BTC. Which coins did you sell? The first ones? The last ones? The IRS lets you choose your method—FIFO, LIFO, or specific identification—but you have to stick with it. And you have to document every transaction: exchange, date, amount, fee, and USD value at time of purchase.
That’s why so many people get tripped up. They forget a small swap on a niche DEX like LFJ v2.2 on Arbitrum. They don’t track gas fees when minting an NFT. They ignore the cost of buying tokens during a failed airdrop like SHREW or MetaGear. And when tax season hits, they’re left with a spreadsheet full of gaps and a panic attack.
But it doesn’t have to be this way. You don’t need fancy software. You don’t need to be an accountant. You just need to start tracking now—before the next trade. Write it down. Use a free tool. Take a screenshot. The goal isn’t perfection. It’s awareness. Because if you don’t know your cost basis, you’re flying blind through one of the most important parts of crypto ownership: your taxes.
Below, you’ll find real-world examples of how cost basis plays out in crypto trades, airdrops, exchange failures, and regulatory crackdowns. Some posts show people who lost money because they didn’t track it. Others show how smart record keeping saved users from IRS trouble. Whether you’re holding Bitcoin, trading on Arbitrum, or wondering if that NFT you got for free counts as income—this collection has what you need to get it right.
Form 8949 is the IRS form you must use to report all cryptocurrency sales and trades. Starting in 2025, exchanges will send new tax forms, but you still need to track your own cost basis. Learn what to report, how to avoid penalties, and how to prepare.