HIFO (Highest In, First Out)

A cost-basis accounting method, a form of specific identification, where you dispose of the bitcoin lots with the highest purchase price first. Because the highest-cost coins have appreciated the least, HIFO minimizes the taxable capital gain (or maximizes the loss) on each sale or spend. In the US the default is FIFO unless you specifically identify lots with adequate records.

HIFO pairs naturally with spend-and-replace: replacing constantly mints fresh lots at the current price, so spending the highest-basis coins first realizes little or no gain while long-held low-basis coins keep deferring. Requires contemporaneous records (acquisition date, cost, wallet) and is US-centric. Not tax advice.