FIFO

FIFO, first in first out, is an accounting convention holding that the oldest units of an asset are treated as the first ones sold. If an investor bought 1 bitcoin at 20,000 dollars in 2020 and another at 60,000 in 2021, a sale of 1 bitcoin under FIFO realizes gain against the 20,000 dollar lot, the earliest acquired.

Why it matters

Cost basis method can change a tax bill dramatically without changing the trade. For long term holders of appreciating assets, FIFO tends to realize the largest gains first, since the oldest coins usually carry the lowest basis, though those gains are also most likely to qualify for long term capital gains rates. United States taxpayers may instead use specific identification, choosing exactly which lot they sold, if their records support it, and IRS guidance effective from 2025 requires tracking cost basis per account or wallet rather than universally, making disciplined recordkeeping essential for anyone moving coins between platforms. FIFO is typically the default when no election is made.

In the gold vs bitcoin debate

Tax treatment is an unglamorous but real front in the comparison. In the United States, physical gold is taxed as a collectible, with long term gains rated up to 28 percent, while bitcoin is treated as property under 2014 IRS guidance, with standard capital gains rates generally topping out at 20 percent. Bitcoin's transparent ledger makes lot level records unusually provable, and gold's privacy makes them unusually informal; FIFO applies to both, but the audit trails could hardly differ more.