Cost basis: the total average and moving average methods
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 7 min
In short
Two methods are used to work out the cost basis of a crypto asset: the total average method and the moving average method. The choice changes how gains fall across years, but over the full life of a holding the totals converge. Which method you may use, and whether a filing is required to elect it, is set by the rules — check the National Tax Agency's guidance and a tax professional.
Key points
- The total average method averages a whole year at once — simple to compute and hard to get wrong
- The moving average method recalculates on every purchase, so your position is current at any moment
- Annual figures differ between the two, but lifetime totals for a holding match
- A method, once chosen, is meant to be applied consistently; ask a tax professional before switching
Definition
A rule for deciding what a sold crypto asset originally cost you. The total average method divides a year's total purchase cost by the total quantity; the moving average method updates the average unit cost on every purchase.
When you buy the same asset repeatedly, a sale does not tell you which purchase you sold. Averaging rules fill that gap. The total average method divides the year's total acquisition cost by the total quantity to give a single unit cost for the year. The moving average method recomputes the average each time you buy, blending the existing balance with the new purchase.
In practice the difference is effort and timing. The total average method needs one calculation after year end, which is far lighter if you trade often — but it cannot give you a settled figure mid-year. The moving average method lets you value your position at any time, at the cost of recording every trade: one missing entry throws off every average that follows.
Neither method is the 'cheaper' one. They shift when gains land across years; the cumulative result once you have sold the holding entirely is the same. Choosing a method as a tax-saving tactic is a misunderstanding of what it does.
Nor is the method something to switch freely per asset — consistent application is the expectation. Which methods are available to you, whether an election has to be filed, and whether it can be changed later are all set by rules that do get amended. Confirm with the National Tax Agency's published material and a tax professional before you commit.
Watch out for
- · This page is a general orientation, not tax advice
- · The choice of method is not a tax-saving device; cumulative gains are unchanged
- · Check which method your calculation tool is set to — it may not be the one you assume
Frequently asked questions
Can I use a different method for each exchange?
The calculation is generally done per asset, combining holdings across venues — it is not designed around using different methods per exchange. Confirm the specifics with a tax professional.