What does FIFO have to do with bitcoin taxes when you self custody?

#asknostr

Let's say you bought two UTXOs: one five years ago at $10,000 and another today at $20,000. If you sell the newly purchased UTXO a year later for $30,000, FIFO would require you to consider the cost basis of the newer UTXO ($20,000) when calculating your gain or loss. According to FIFO, the oldest UTXO (the one from five years ago) has not been sold yet, so it cannot affect the calculation of the gain or loss from the newer UTXO.

I don't know why they call it FIFO unless you are a dumb end user who keeps their crypto in a exchange.

Simply put, each utxo has a purchase and sale price, and your profit is solely dependent on that. FIFO is just there to confuse you.

#taxes