Cost Basis
By Menno — 13 years in crypto, 3 bear markets survived, zero paid promotions
Last updated: March 2026
Cost basis is the average price you paid for an asset across all your purchases. It determines your profit or loss when you sell and is essential for tax reporting.
Your cost basis is the weighted average price at which you acquired an asset. If you bought 1 BTC at $40,000 and another 1 BTC at $60,000, your cost basis is $50,000 per BTC.
Cost basis matters for two reasons:
1. Profit/loss calculation: if your cost basis is $50,000 and you sell at $70,000, your profit is $20,000 per coin. If you sell at $45,000, your loss is $5,000.
2. Tax reporting: in most countries, you owe capital gains tax on the difference between your selling price and cost basis. Accurate tracking is essential.
DCA naturally creates a smooth cost basis because you buy at many different prices. This is one of its key advantages — your cost basis reflects the average market price over your investment period rather than a single point in time.
Alpha Factory's portfolio tracker helps you monitor your cost basis across all holdings.
Related Tools on Alpha Factory
Related Terms
Dollar-Cost Averaging (DCA)
Dollar-cost averaging is an investment strategy where you invest a fixed amount at regular intervals regardless of price, reducing the impact of volatility on your overall purchase.
Lump Sum Investing
Lump sum investing means deploying all available capital into an investment at once, rather than spreading purchases over time. It statistically outperforms DCA in rising markets but carries higher timing risk.
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