Your cost basis is the total amount you paid to acquire bitcoin, including any applicable fees. This figure is essential when you sell or otherwise dispose of bitcoin, as it determines whether you've experienced a capital gain or capital loss.

Understanding cost basis and bitcoin "lots"

Each time you acquire bitcoin, by making a purchase or receiving a payment or gift, a new "lot" is created. A lot is defined by:

• The amount of bitcoin purchased
• The price at which it was acquired
• The date of the transaction

When you send, spend, sell, or gift bitcoin, one or more of your lots (either fully or partially) are used to fund the transaction. Which lots get used first depends on your accounting method.

Your country's tax rules may allow or require specific methods for determining which lots are used first. Common methods include:

• FIFO (First-In, First-Out): Uses your oldest lots first
• LIFO (Last-In, First-Out): Uses your most recent lots first
• HIFO (Highest-In, First-Out): Uses the lots with the highest cost first

You can download your trading history to calculate your cost basis. You can also review and edit your cost basis directly on the Strike Dashboard.

Example of a HIFO cost basis calculation:

• January: You bought ₿0.05 at $35,000/BTC for a cost of $1,750, or $1,767.50 with fees included.
• June: You bought ₿0.03 at $45,000/BTC for a cost of $1,350, or $1,363.50 with fees included.
• December: You sold ₿0.04 at $55,000/BTC for a sale revenue of $2,200, or $2,178.00 with fees deducted.

Overall, you purchased ₿0.08, spending a total of $3,131.00, and sold ₿0.04, receiving a total of $2,178.00. To determine whether the sale of ₿0.04 resulted in a capital gain or loss, you must determine the cost basis at which the ₿0.04 was acquired. Using HIFO, you use the highest cost first:

1. Use the entire June purchase of ₿0.03 at $45,000, which cost $1,363.50 (fees included).
2. Use a portion of the January purchase of ₿0.05 at $35,000/BTC to account for the remaining ₿0.01 of the sale:
   • Portion used: (0.01 / 0.05) = 0.20 or 20%
   • Pro-rated cost: 0.20 X $1,767.50 = $353.50

Total cost basis of ₿0.04 sold: $1,363.50 (June lot) + $353.50 (January lot) = $1,717.00

The sale, after fees, totaled $2,178.00, which means the capital gain was $461.00 ($2,178.00 - $1,717.00).

Understanding the performance metrics

Separate from cost basis, Strike shows three summary metrics on your Bitcoin screen: Total purchased, Average buy price, and Total return. These are quick reference points for how your bitcoin purchases have performed to date. They are not used for tax reporting.

Average buy price is the volume-weighted average across all bitcoin purchases on Strike. Comparing it directly to the current bitcoin price won't give you an accurate total return figure, because total return is not derived from your average. It's calculated lot by lot. The acquisition cost of each lot is compared to the current value, and the resulting gains and losses are summed.

Total return combines two components: realized return from bitcoin you've sold or disposed of on Strike, and unrealized return from bitcoin you still hold. It does not include bitcoin transferred off Strike or bitcoin with unknown cost basis.

Your total return may differ from what you'd expect based on simple price comparisons:

• Unrealized gains are estimates. The total return shown is based on a mid-market bitcoin rate aggregated across multiple liquidity providers. This rate changes constantly, so your total return fluctuates with it.
• Fees are included in your cost basis. When you buy bitcoin, any fee is part of your cost basis. If you spend $100 and $1 goes to fees, your cost basis is the full $100, but you received slightly less than $100 worth of bitcoin.
• The displayed bitcoin price may differ slightly from the rate used to estimate gains. The price on your chart and the rate used to calculate total return come from similar but not identical sources, so minor differences are normal.

Learn how to manage your cost basis.

Strike does not provide tax advice. These FAQs are for informational purposes only and shouldn't be considered tax advice or recommendations. Please consult a professional regarding the tax implications of buying and selling bitcoin.