With thousands of cryptocurrency coins and tokens now actively traded in the online space, keeping tabs of your investments can be somewhat challenging. Similarly, if you have a tendency to buy and sell digital currencies on a regular basis, understanding your obligations to the taxman can be daunting.
Online platform CoinTracker seeks to solve both of these issues with its cryptocurrency portfolio tracker and tax calculator service. The idea is simple – by connecting your cryptocurrency exchanges and wallets to the CoinTracker portal, not only will the platform give you real-time data on the value of your investments – but it will automatically generate your capital gains.
In my CoinTracker review, I explore whether or not the platform is worth joining. I cover the ins and outs of how CoinTracker works, what you can do, and how effective its capital gains tax automation service is.
What is CoinTracker?
In a nutshell, CoinTracker is an online portal that gives you real-time access to your cryptocurrency portfolio. That is to say, the platform allows you to connect third-party exchanges and wallets, with the view of giving you second-by-second updates on the value of your investments.
Not only does this allow you to check your balances in real-time, but you can also keep tabs on transactions. This is especially useful if you are a full-time trader and you wish to automate your reconciliation processes. It is also useful if you live in a country that taxes cryptocurrency profits as capital gains.
As of 2020 a significant number of jurisdictions do just this, so it’s important that you are well prepared. In the case of CoinTracker, its capital gains tax calculator is fully supported in the UK, US, Australia, and Canada. If you live outside of these countries, you will be offered partial support. This just means that you will need to specify the exact accounting standards that your country utilizes – such as FIFO or ACB.
Since the platform was launched, more than 100,000 users have engaged with the CoinTracker portal. The platform claims that this has translated into more than $20 billion of tracked transaction volume, and over $600 million of claimed capital losses.
Exchange and Wallet Integration
In order to benefit from the tracking and taxation services that CoinTracker offers, the platform needs access to the location that you are storing your cryptocurrencies. If you wish, you can export data from the cryptocurrency exchange or wallet in question, and then upload it into your CoinTracker account. However, if you’re looking for the easiest way to integrate your balances with the platform, CoinTracker allows you to do this automatically via an API.
CoinTracker supports more than 300 cryptocurrency exchanges. In truth, unless you are using a super-obscure exchange that suffers from really weak liquidity – it is all-but-certain that you will find that your platform is supported.
To name a few, CoinTracker supports:
I was surprised to see eToro listed as a supported exchange – as it is more of a cryptocurrency broker. However, upon clicking on the link, the team at CoinTracker notes that support for eToro is coming soon.
Ultimately, if you are using a cryptocurrency exchange that is not supported by the CoinTracker API, the good news is that you can still add transactions into the portal. You would need to export a CSV file from your respective exchange, and then upload it into CoinTracker. The bad news is that this is a highly manual process that requires you to re-upload a CSV file every time you want an updated overview of your transactions and balances.
Connecting the Cryptocurrency Exchange to CoinTracker
When it comes to connecting your chosen exchanges to CoinTracker, the process will vary depending on the platform in question. With that being said, there is a general process that remains somewhat constant across all exchanges – so let me take Binance as a prime example.
- The first step is to log in to your Binance account and look for the ‘API’ button
- Then, click on ‘Create New API’ and give it a name – such as ‘CoinTracker’
- If you have two-factor authentication set up (which you should do), you will be asked to verify authorization. After all, you are giving a third-party platform access to your transaction data.
- Binance will then display your API key. Copy it to your clipboard.
- Before heading over to CoinTracker, you might want to consider amending the permission rights. Crucially, as you will not be using CoinTracker to buy and sell coins on your behalf, you should remove trading access from the API
- Finally, log in to your CoinTracker account, click on Binance, and then paste the API.
From then on – all Binance transactions will be tracked. As I briefly alluded to above, each exchange link-up process will vary slightly. However, the actual process of obtaining an API key from within the exchange and pasting it into CoinTracker remains pretty much constant.
On top of third-party cryptocurrency exchanges, CoinTracker also covers heaps of wallets. Not all wallets are supported for API integration, so you are best advised to check this before signing up. Nevertheless, when it comes to linking up your cryptocurrency wallets with CoinTracker, the process is slightly different from that of an exchange.
Once again, the specific process will vary from provider-to-provider Nevertheless, in most cases you will need to log in to your cryptocurrency wallet, and export something known as a ‘safe report’. Although I cover security a bit further down, the safe report essentially creates a ‘read-only’ version of your wallet.
That is to say, while the beneficiary will be able to view balances and ongoing transactions, they will not be able to make any changes. Once you import the wallet safe report into CoinTracker, all future balances and incoming/outgoing transfers will be motioned.
Tracking – How Does it Work?
So now that you have a basic overview of how cryptocurrency exchanges and wallets can be linked to your CoinTracker account, I am now going explain what this actually allows you to do.
Firstly, let’s supposed that you are an active cryptocurrency investor. As such, you hold 20 different coins across four different exchanges. You also have some coins stored in private wallets. If you wanted to keep tabs of how your portfolio is performing, this is a cumbersome task for a number of reasons.
There is likely to be a variation in the value of your coins depending on the specific exchange you have them held at. Although the difference is often minute, this can be significant if you have a large amount invested. With this in mind, you will likely need to log in to each of the respective exchanges and check the value of your coins.
This isn’t a requirement with CoinTracker, as the platform will know that you have coins stored at different exchanges – and base its real-time valuation on this. Crucially, you will be able to view everything within a single portfolio – so there is no requirement to log into each exchange.
Much like in the case of having cryptocurrencies stored in multiple exchanges, this might also be the case with wallets. For example, you might have your Bitcoin stored in a BTC-specific wallet, and your Ethereum and ERC-20 tokens held elsewhere.
Either way, it can be a pain to have to constantly check individual balances and transactions. Once again, by integrating your wallets into CoinTracker – everything can be viewed via a single portal.
Different Cost Price
One of the biggest problems that CoinTracker solves is that of varying cost prices.
For example, let’s suppose that you bought:
- $500 worth of Bitcoin at a cost of $5,450/BTC
- $2,400 worth of Bitcoin at a cost of $7,990/BTC
- $750 worth of Bitcoin at a cost of $6,150/BTC
- $600 worth of Bitcoin at a cost of $8,500/BTC
When you start adding additional different coins and cost prices, not only does it become a logistical nightmare to calculate what your current return on investment is, but also your overall capital gains and hence tax payable.
Once you have linked your cryptocurrency exchanges and wallets through the API key, the CoinTracker protocol will constantly refresh its servers. This means that whenever you log into your CoinTracker portfolio, you should be able to view real-time prices. This could be crucial in a cryptocurrency marketplace that moves at an incredibly fast pace.
It is important to note that not all cryptocurrencies are supported by the CoinTracker application. In total, the platform covers over 2,500 tokens – which is huge. At the time of writing, CoinMarketCap notes that there are just over 5,400 cryptocurrencies tradable on exchanges.
However, once you get past the first few hundred, you will notice that both market capitalization and trading volumes on these projects are super-low. As you begin to work your way down the list, the vast bulk of projects are virtually dead.
With that said, unless you are looking to track a really obscure cryptocurrency – you should be covered.
While it is clear to see that the portfolio tracking feature offered by CoinTracker could be of great use, I would argue that the platform really stands out for its capital gains tax reporting feature. Before I discuss the ins and outs of how this actually works, it is important for me to first explain why you might want to consider it.
In a nutshell, various governments around the world now put cryptocurrency gains in the same category as other investment classes – such as stocks and shares. That is to say, there is every possibility that you will need to pay capital gains tax on any profits that you make from your cryptocurrency investment and trading endeavours.
Now, I am not a tax specialist – so it is absolutely crucial that you seek independent advice. However, the general gist is as follows:
- You invest $10,000 into Bitcoin when it is priced at $5,000 per coin
- 12 months later, you sell your Bitcoin back to fiat currency when it is priced at $9,000 per coin.
- In percentage terms, this works out at an increase of 80%
- On an investment of $10,000, this amounts to capital gains of $8,000
- In theory, you will need to pay capital gains tax on that $8,000 profit
In the example above, this is actually a very straight forward scenario. In other words, if you simply invested in Bitcoin and sold the coins back to fiat currency a few months or years later at a profit – you likely wouldn’t need a service like CoinTracker. At the other end of the spectrum, once you start adding in several coins, or purchases that were made at different dates and prices – things start to get very complex.
This is especially the case if you are an active trader that places lots of buy and sell orders throughout the month. Crucially, it is likely that you will still need to pay tax on your gains even if you do not cash the proceeds back out to fiat currency in your bank account. For example, you might be trading crypto-to-fiat and crypto-to-crypto pairs and keep the proceeds in the exchange.
Without the aid of an automated system like CoinTracker, you would need to manually reconcile each and every trade – with the hope that you can ascertain exactly how much you have made (or lost), and how much you will need to pay in capital gains tax.
Capital Gains Reporting
When it comes to the calculation itself, CoinTracker will base your profits and losses on the price that you originally paid for the coins, and then the price at which you sold them for. As such, you will get to view and download a report that outlines each and every transaction that you made – within the time-frame that you specify.
However, the difficult part is the underlying accounting process – not least because different countries use different reporting standards. For example, the US gives you the option of both FIFO (first-in-first-out) or specific identification. This is also the case with Germany. Australia prefers specific identification but will accept FIFO if this is not possible. Canada actually requires ACB (adjusted cost base) accounting.
The good news is that you get to specify which accounting standard you want to utilize – to mirror that of your country of residence for tax purposes. Once you have generated the report – this will give you a birds-eye view of what you need to report to your respective tax body and thus – how much you need to pay based on the respective capital gains tax rate!
Which Countries Does CoinTracker Support?
As I briefly mentioned towards the top of this review, CoinTracker offers full support for the following jurisdictions:
This means that the specific tax treatment and reporting standards have been fully integrated into the CoinTracker system – so there is no need to go and find this information out for yourself.
With that being said, the CoinTracker capital gains tax report service is potentially suitable for all countries. That is to say, you will need to assess what reporting method is required yourself (FIFO, ACB, etc.) and then specify this before you generate the report.
How Much Does CoinTracker Cost?
When it comes to pricing, CoinTracker offers four plans for you to choose from. The specific plan that you opt for will ultimately depend on what your requirements are.
Here’s an overview of what you get with each plan:
Free Plan – $0
The Free Plan offers the vast majority of features, albeit, you will be capped to a maximum of 25 transactions. This includes:
- Support for all 2,500 cryptocurrencies
- No limit to the number of third-party cryptocurrency exchanges and wallets that you can connect to via an API
- Error reconciliation
- View your transaction history via a downloadable CSV file
- Download your capital gains report via a CSV file
- Choose your preferred accounting method
- Export your transactions to TurboTax and TaxAct (US only)
In truth, if you are more of a cryptocurrency ‘investor’ than a ‘trader’, there is every chance that the Free Plan will suffice. For example, let’s suppose that you bought $1,000 worth of Bitcoin in January, March, and July. Then, you decide to sell the entire basket back to fiat currency in December. All in all, you have only engaged with four separate transactions – leaving you well short of the 25-transaction limit.
Hobbyist Plan – $59
There is just one difference between the Free Plan and the Hobbyist Plan – you will be entitled to 100 transactions as opposed to 25. This will cost you $59. Other than that, you will have access to all of the same features as found in the Free Plan.
Professional Plan – $59
At a cost of $199, the Professional Plan permits up to 1,000 transactions. On top of the features found in the Free and Hobbyist Plans, you will also have access to live chat support. The Professional Plan also allows you to summarize your taxes on a wallet-by-wallet basis, and it can take into account DeFi (Decentralized Finance) projects.
Finally, the Professional Plan can also take margin trading into account. This is absolutely fundamental if you are a seasoned investor that has a tendency to apply leverage to your trades. After all, there will be a slight variation in how your capital gains are accounted for – as you have metrics like overnight financing to consider.
With this in mind, the Professional Plan is likely to be the minimum option for you if you have bought and sold cryptocurrencies on margin. Otherwise, the capital gains report will not be 100% accurate.
Custom Plan – Bespoke Pricing
If you want the full 360-degree service offered by CoinTracker, you might need to consider the Custom Plan. On top of the features found in the previous three plans, you will also get a CPA (Certified Public Accountant) consultation. This could be of interest if you think that your circumstances are slightly more complex, or simply – you have facilitated more than 1,000 transactions throughout the tax year.
If you are a full-time trader, then this is all-but-certain to be the case. Don’t forget, each and every trade requires both a buy and sell order – so this amounts to just 500 trades. In fact, simply making an internal transfer or depositing and withdrawing funds also counts as a transaction, so you would be surprised how quickly this can build up.
Unfortunately, the Custom Plan does not come with a fixed price. Instead, you will need to contact the team at CoinTracker and discuss your requirements. In turn, they will give you a bespoke price.
Although one would assume that a mobile app was part and parcel of offering a real-time cryptocurrency tracking service, this is actually something that was only launched in late 2018 by CoinTracker. Nevertheless, the CoinTracker mobile app allows you to check the value of the portfolio at the click of a button.
Much like the main desktop version of the platform, each and every coin will update in real-time – as long as you have made the required API integration.
The app is available to download free of charge on both Android and iOS devices. It has a 4/5 rating on Google Play, albeit, this is only across 51 individual reviews. At 3.3/5 – there are just 11 reviews on the iOS App Store.
Is CoinTracker Safe?
The million-dollar question with respect to CoinTracker is whether or not it is safe. After all, you will be giving the platform access to your cryptocurrency exchanges and wallets – so it’s absolutely fundamental that you understand whether or not this presents risks.
Firstly, in order for CoinTracker to give you the information that you require in real-time, you will need to go through the API key process. For those unaware, an Application Programming Interface – or simply API, allows a third-party platform to access data from an external source.
In the case of CoinTracker, not only does this means that the platform gets to view your wallet and exchange balances, but each and every transaction that you conduct thereon.
Now, when it comes to wallets – you will be exporting a ‘safe report’ and then importing this into CoinTracker. As I briefly mentioned earlier, this allows the CoinTracker portal to view all activities within the wallet – but NOT execute any account functions. In Layman’s terms, this means that the platform does not have the capacity to send, receive, or transfer any of your cryptocurrency holdings.
In the case of cryptocurrency exchanges, things are slightly different. By this, I mean that conventional APIs can actually be utilized at third-party platforms to buy, sell, and trade digital currencies at the exchange in question. This is exactly what happens when you use an automated trading system, EA (Expert Advisor) or robot.
In other words, you give the automated system authorization to trade at the cryptocurrency exchange on your behalf. This wouldn’t be possible unless you provide the API key.
With that being said, CoinTracker has no intention of making any changes to your cryptocurrency exchange accounts. But, I would suggest strongly that you still remove the permissions before pasting the API key into CoinTracker, In doing so, the only thing that CoinTracker will be able to do is view your transactions.
CoinTracker Review: The Verdict?
In summary, CoinTracker is a useful platform that is suitable for cryptocurrency investors of all shapes and sizes. For example, you might be a passive investor that buys and sells a few coins each year. If this is the case, you should be fine sticking with the CoinTracker Free Plan, which permits up to 25 transactions.
I like the fact that you will still have access to the vast bulk of features on the Free Plan – especially capital gains reporting and your choice of accounting standards. At the other end of the spectrum, CoinTracker is especially useful if you actively trade cryptocurrencies,
Although you will need to pay a fee for anything above 25 transactions, the application has the potential to save you countless hours of manual reconciliation. In fact, you will stand the best chance possible of avoiding a mistake that in the long-run, could end up costing you significantly more in tax authority fines.