What is Cost basis?

Cost basis is what you paid for an asset, including fees, and it is the number every profit calculation starts from. Sell for more than the basis and the difference is a gain; sell for less and it is a loss. For a single purchase it is trivial. For a coin bought ten times at ten prices across three venues, the basis of the portion you sell depends on which lots you are deemed to have sold, and that is where methods come in.

The common lot methods are FIFO, which sells the oldest purchase first, LIFO, which sells the newest, HIFO, which sells the highest-cost lot first and therefore minimizes the reported gain, and average cost, which blends every purchase into one price. They produce different taxable gains from identical trades, and which ones are permitted depends on the jurisdiction. Average cost is the natural method for a portfolio view; lot methods are a tax decision.

The trap that breaks most portfolio math is the transfer. Moving coins from an exchange to your own wallet is not a sale, and the coins keep the basis they had. A tool that sees only one side of the move records a disposal on one venue and an acquisition at market price on the other, which manufactures a gain or a loss that never happened. Matching transfers between your own accounts is therefore the first job of any honest cost basis, before any method is applied.

TrueHold shows a weighted average cost where a basis is displayed and treats transfers between your own accounts as transfers. The tax-ready export lists cost basis, realized PnL, transfers and DeFi events so that an accountant or a tax tool can apply the lot method your jurisdiction requires. The cost basis guide in the blog walks through the choice.