How to Calculate Your Crypto Cost Basis

If you buy crypto multiple times at different prices, your cost basis is the average price you paid per unit. Knowing this number is fundamental to understanding your true profit or loss, and to filing correct tax returns.

What is cost basis?

Cost basis is the original value of an asset for tax purposes. When you eventually sell, your taxable gain or loss is calculated as the sale price minus your cost basis. If you bought Bitcoin at $50,000 and sell at $80,000, your gain is $30,000 per coin. But if you bought at multiple prices, you need a method to calculate which coins you sold and at what cost.

The weighted average cost method (WAC)

WAC is the simplest and most commonly used method for DCA investors. Instead of tracking individual purchases, you calculate one average price across all your buys. The formula is: total amount invested divided by total units held. If you invested $1,000 in four purchases and hold 0.013 BTC, your average cost is $76,923 per BTC. Every time you buy more, the average updates.

WAC vs FIFO

FIFO (first in, first out) assumes that when you sell, you are selling your oldest coins first. In a rising market, this typically results in higher taxable gains because your oldest coins were bought cheapest. WAC averages everything together, which often produces a more predictable tax outcome. Most DCA investors prefer WAC because it reflects the reality of their strategy, they are not buying and selling specific lots, they are managing a position.

Why it matters for DCA investors

DCA investors make many small purchases over time. Tracking each purchase individually becomes unmanageable quickly. With 52 weekly buys in a year, you would have 52 separate cost lots to track under FIFO. WAC collapses all of that into a single number that updates with each purchase, making reporting dramatically simpler.

What counts toward your cost basis

Your cost basis includes the purchase price plus any fees paid to acquire the asset. If you bought $100 of Bitcoin and paid a $2 exchange fee, your cost basis is $102 for that purchase. Missing fees is a common mistake that leads to overstating your gains, always include them.

How DCAlog tracks your cost basis

DCAlog uses the weighted average cost method automatically. Every time you log a purchase, the app recalculates your average cost across all holdings for that asset. The Tax Report page gives you a yearly breakdown of your buy activity, your WAC, and your cost basis summary, everything you need to hand to your accountant or fill in your tax return. Only purchase transactions are included, so the numbers stay clean.

A note on tax jurisdictions

Tax treatment of crypto varies significantly by country. In some jurisdictions WAC is the required method; in others FIFO is mandated. DCAlog is a tracking tool, not tax advice, always confirm the rules in your country with a qualified accountant before filing.