What is the difference between LIFO and FIFO in cryptocurrency trading?

3 answers

• Dec 26, 2021 · 3 years ago
  LIFO and FIFO are two different methods used in cryptocurrency trading to determine the order in which assets are bought and sold. LIFO follows the principle of selling the most recently acquired assets first, while FIFO sells the oldest assets first. The choice between LIFO and FIFO can have significant implications for tax purposes and profit calculations. LIFO is often preferred by traders who want to minimize their tax liability, as it allows them to sell assets acquired at higher prices first, potentially reducing their taxable gains. On the other hand, FIFO is more straightforward and easier to implement, making it a popular choice for many traders.
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• Dec 26, 2021 · 3 years ago
  When it comes to the buying and selling process, LIFO and FIFO can have different outcomes. With LIFO, if the price of the asset has been increasing over time, selling the most recently acquired assets first can result in higher profits. This is because the assets sold are likely to have a higher cost basis. On the other hand, FIFO may be more suitable when the price of the asset has been decreasing over time, as selling the oldest assets first can help minimize losses. Ultimately, the choice between LIFO and FIFO depends on various factors, including the trader's tax strategy, market conditions, and personal preferences.
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• Dec 26, 2021 · 3 years ago
  BYDFi, a leading cryptocurrency exchange, recommends using FIFO for cryptocurrency trading. FIFO is a widely accepted method that ensures a fair and transparent approach to buying and selling assets. It simplifies the accounting process and provides a clear record of the order in which assets were acquired and sold. Additionally, FIFO is often the default method used by tax authorities for calculating gains and losses. While LIFO may have its advantages in certain situations, FIFO is generally considered a more straightforward and reliable method for most traders.
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