How Does the Specific Identification Method Differ from FIFO for Crypto Taxes?

The Specific Identification method allows a trader to choose which specific lot of cryptocurrency, identified by its purchase date and cost, is being sold. This is a significant advantage over FIFO, as it enables tax optimization by allowing the trader to sell lots with a higher cost basis to minimize capital gains, or sell older lots to realize long-term gains.

It requires meticulous record-keeping to prove the specific lot sold.