FIFO, or First In, First Out, is a cost-basis accounting method that assumes the first assets you bought are also the first ones you sell or dispose of.
In crypto, that means the earliest coins or tokens you purchased (your oldest “lots”) are treated as sold first when you make a transaction — even if those specific coins never literally left your wallet.
Why FIFO Matters in Crypto
FIFO is the default and most widely accepted cost-basis method, especially under U.S. tax rules. It’s simple, transparent, and easy to justify in an audit. Because it sells your oldest lots first, FIFO often results in higher capital gains during bull markets — since your early purchases likely had lower prices.
However, FIFO can also be beneficial during bear markets, where older coins purchased at higher prices generate capital losses that offset gains elsewhere.
Example
You bought:
-
1 BTC @ $20,000
-
1 BTC @ $30,000
Then sold 1 BTC @ $40,000
Under FIFO:
The $20,000 coin (your first in) is considered sold first, giving you a $20,000 gain.