Taxes — the tedious part for crypto investors
If you are new to the crypto world you’ll realize quickly that there are many pitfalls you want to avoid. You get afraid of scammers, are bewildered by enormous price volatility and need some time to understand all those crazy acronyms like FUD or FOMO.

Taxes are not your primary concern. Yet, they play an important role — even in your early days of crypto investing. Here is why:
Many crypto newbies don’t start with investing in Bitcoin (BTC) or Ethereum (ETH). They rather get caught by an interesting project they personally care about (read about my own journey here). This project might be offering its tokens via an ICO (Initial Coin Offering / Initial Token Sale) or via some crypto exchange. In both cases it is rather unusual that investors can simply invest with fiat money like USD or EUR.
Instead the investment process goes in two steps:
- First you buy one of those main crypto currencies like ETH (or BTC).
- Then you’ll use (some or all) that ETH to invest into your project.
The problem: This intermediate trading step is tax-relevant in many cases.
ETH is rather volatile. You’ll usually implicitly “speculate” (according to many tax laws) with ETH between buying it with fiat and selling it for the token you originally wanted to buy.
Let’s make an example: You want to buy Shift tokens because you like the idea of the project. You have a quick look at Coinmarketcap and see at which exchanges you might get the token as well as the trading pairs SHIFT/BTC and SHIFT/ETH. Let’s say you want to go via ETH. You are not silly: you’ll wait for the right moment to buy ETH as cheap as you might get it. You’ll transfer some or all that ETH to the exchange where you can buy SHIFT tokens. Then you’ll wait for the right moment to buy SHIFT as cheap as possible. You might wait for days or weeks to perform that trade. That’s totally reasonable. But your ETH now has another price than at the time you originally bought it.
Consequence: You might have unintentionally “speculated” with ETH in this example.

Tax laws are different from country to country and I’m no lawyer or accountant— so please don’t take this as advice and seek a professional for your regional rules. But in many countries like here in Germany you need to hold a crypto currency for more than one year to avoid taxes due to speculation. We simply didn’t in this case.
What to do now?
Well, you have the price when you bought ETH — that should not be the problem. You need to investigate the average value of ETH on the day you sold it. You might use historical data from Coinmarketcap or similar sites to do that. This might result in gains or losses. You might also have trading or withdrawal fees on your exchanges. You should be able to use these to reduce your tax-relevant gains.
Conclusion
If you invest in crypto then there is a big chance that some of your trades will be tax-relevant. It is rather hard to avoid — even if you just want to HODL. So, think about these aspects early on. There are some brand-new tax apps like CryptoTax out there that might help you, but none of them covers everything you’ll need for now. Too many wallets, too many exchanges, too much innovation going on now. It’s simply too early to automate. Excel is your friend.
Feedback?
That much for a first teaser. Do you like it? Should I go deeper into that topic? I’d be happy about some claps. Depending on that I might share some more practical tips that might be useful for you.
Disclaimer: This article is not intended to be an investment advice of any sort. Do your own research and search for professional support if you intend to invest in one of the projects mentioned in this article.
Further reading: If you liked this story, you might also want to check out my earlier work about “Democratizing the digital markets” or my “Blockchain vNext series”.
You are also welcome to follow me on Twitter or get in touch via LinkedIn (but please tell me that you found me via Medium).

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