Cost Basis

Cost basis is straightforward: it's what you paid. If you bought 1,000 USDC for $1,000, your cost basis is $1 per USDC. When you sell, your gain or loss is the selling price minus the cost basis.

It gets complicated when you buy the same token at different prices over time. If you bought USDC at $0.95 during a depeg and more at $1.00 later, each lot has a different cost basis. Tax methods like FIFO (first in, first out) or specific identification determine which cost basis applies when you sell.

For USDC, cost basis tracking is simpler than for volatile assets since the price barely moves. The main complexity comes from yield: USDC received as yield has a cost basis of its fair market value when you received it (typically $1).