Cost basis refers to the original value of an asset, used to determine gains or losses when selling that asset. For cryptocurrencies, this includes the purchase price plus any associated costs, like transaction fees.When you buy cryptocurrency, the cost basis is straightforward. However, if you acquire coins through mining, staking, or airdrops, calculating cost basis becomes more complex. In these cases, it usually reflects the market value of the coins at the time you received them.Maintaining accurate records of your cost basis is crucial for tax purposes. When you eventually sell, trade, or use your cryptocurrency, you’ll need to report the difference between your selling price and your cost basis to assess capital gains or losses. This understanding helps in effective tax planning and compliance, ensuring you know how much you might owe or how losses may offset other gains. While it can seem complicated, tracking your cost basis helps clarify your financial position and potential tax responsibilities.