Understanding Realized vs. Unrealized Gains in Cryptocurrency: A Guide

Like the stock market, cryptocurrency profits and losses have unique characteristics. When you sell a crypto asset, the gain is realized, meaning it’s converted into cash. However, paper gains or losses on your holding are unrealized until you actually sell. Understanding this distinction is crucial for investors as it impacts their tax obligations and investment strategy. This article will explain how to identify realized and unrealized gains, discuss their implications for taxes, and explore tools for tracking them effectively.