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Some investors believe they only owe taxes when they convert cryptocurrency into cash. However, every crypto transaction can be a taxable event, meaning taxes may be due even when no fiat currency is involved.
For example, if you own Bitcoin (BTC) and swap it for Ethereum (ETH), you generally need to pay taxes on any profit earned from the Bitcoin sale—even if you never converted the proceeds into cash.
Stablecoins such as Tether (USDT) and USD Coin (USDC) may feel like cash because they are pegged to the U.S. dollar, but trades involving stablecoins can also be taxable events.
If you use cryptocurrency to purchase something, you may still owe capital gains tax based on the asset’s original acquisition price before it was transferred.
For instance, if you bought 0.1 Bitcoin for $3,000 and its value rose to $7,400, then used it to buy a new PC, you would generally need to pay capital gains tax on the $4,400 gain—even though you never converted your Bitcoin into cash.
Trading crypto frequently can create filing challenges because cryptocurrencies are subject to short- and long-term capital gains rates. Tokens sold in less than a year can be taxed at higher rates.

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