Capital gains refer to the profit earned when an asset is sold for more than its purchase price. In the case of cryptocurrency, this occurs when an individual buys digital currency at a lower price and later sells it at a higher price.For example, if someone purchases Bitcoin at $10,000 and later sells it for $15,000, they realize a capital gain of $5,000. This profit can be subject to taxation, depending on the laws in the person’s country.There are typically two types of capital gains: short-term and long-term. Short-term gains apply when an asset is held for one year or less, usually taxed at the individual’s ordinary income tax rate. Long-term gains apply when the asset is held for more than one year, often benefiting from lower tax rates.Keeping track of purchase prices, selling prices, and holding periods is essential for accurately reporting capital gains for tax purposes.