Quick answer
FIFO means your oldest crypto is sold first — often resulting in lower cost basis and higher taxable gains in a bull market.
Accounting
Australia
Canada
India
United Kingdom
United States
FIFO Method
First In, First Out — treats the oldest coins as sold first; commonly required or preferred by tax authorities globally.
AustraliaCanadaIndiaUnited KingdomUnited StatesUnderstanding FIFO Method on crypto
First In, First Out (FIFO) is a cost basis method that assumes the oldest acquired units of a cryptocurrency are sold or disposed of first. Under FIFO, when you sell 1 BTC from a holding of multiple purchases, the cost basis of that disposal is the price of your earliest purchase. FIFO is the default method in several jurisdictions and is required in others. In rising markets, FIFO tends to produce higher taxable gains because the oldest coins are likely to have the lowest cost basis. FIFO is simple to apply and well-understood by tax authorities, making it the most conservative and commonly accepted approach.
First In, First Out (FIFO) is a cost basis method that assumes the oldest acquired units of a cryptocurrency are sold or disposed of first. Under FIFO, when you sell 1 BTC from a holding of multiple purchases, the cost basis of that disposal is the price of your earliest purchase. FIFO is the default method in several jurisdictions and is required in others. In rising markets, FIFO tends to produce higher taxable gains because the oldest coins are likely to have the lowest cost basis. FIFO is simple to apply and well-understood by tax authorities, making it the most conservative and commonly accepted approach.
What this means for your crypto activity
Higher gains in bull markets
In a bull market, FIFO produces higher gains than HIFO because the oldest coins are cheapest.
Required in some jurisdictions
FIFO is the required or default method in Australia, India, and Canada.
US default method
In the US, FIFO is the default if no specific identification method is elected.
Long-term treatment
FIFO may generate more long-term gains (oldest lots are more likely to meet the 12-month threshold) in the US.
Consistency matters
Consistently using FIFO across years is important — changing methods requires careful documentation.
- In a bull market, FIFO produces higher gains than HIFO because the oldest coins are cheapest.
- FIFO is the required or default method in Australia, India, and Canada.
- In the US, FIFO is the default if no specific identification method is elected.
- FIFO may generate more long-term gains (oldest lots are more likely to meet the 12-month threshold) in the US.
- Consistently using FIFO across years is important — changing methods requires careful documentation.
Seeing it in action
Example scenario
Rachel has 3 BTC: Lot 1 bought at $10,000, Lot 2 at $25,000, Lot 3 at $40,000. She sells 1 BTC at $50,000. Under FIFO, Lot 1 is sold first: gain = $50,000 − $10,000 = $40,000. Under HIFO, Lot 3 is sold first: gain = $50,000 − $40,000 = $10,000. The cost basis method choice results in a $30,000 difference in reported gain.
How this works across jurisdictions
- Australia
FIFO or other reasonable method acceptable to ATO; FIFO is the common default.
- Canada
ACB (average cost) method is required for identical property — FIFO not applicable in the traditional sense.
- India
FIFO is the generally accepted method for VDA cost allocation under Indian tax principles.
- United Kingdom
HMRC pooling rules override FIFO — pool average cost applies instead.
- United States
FIFO is the IRS default; other methods available with proper election and record-keeping.
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