If you're someone who interacts with blockchain technology on a regular basis, there's a good chance you've bridged between two different blockchains in the past. There's also a good chance that you've bought, sold or traded crypto on an exchange which exports incomplete transaction data to apps like CoinLedger. Fortunately, we have solution to both these issues-read more about how to merge transactions in CoinLedger below!
Bridging Transactions
In the context of cryptocurrency and blockchain technology, "bridging" refers to the process of transferring assets between different blockchain networks. Multi-chain bridges are designed to help investors move their assets from one blockchain to another. For example, an investor who holds ERC-20 tokens who wishes to move their assets to the Avalanche blockchain can use the Avalanche Bridge.
When to enter a bridge trade transaction into CoinLedger
You may have a Missing Cost Basis Warning caused by incomplete data on your account, and in some cases, unmarked bridge transactions are the culprit. Here's an example:
Let's say someone bought ETH on Coinbase, and then sent it to their Arbitrum address on 1Inch.
There, they subsequently wrapped their ETH, where it became Arbitrum ETH (a wrapped version of Ethereum).
Now, CoinLedger is showing a Missing Cost Basis Warning for their Arbitrum ETH. This isn't due to an issue with CoinLedger, but its due to flaws with the way exchanges and protocols send transaction data to apps like CoinLedger.
In the situation above, there were three transactions that occurred:
A purchase of ETH on Coinbase
A withdrawal of that ETH from Coinbase and a subsequent deposit of that ETH into their 1Inch account (these two transactions occurred at the same time)
Finally, the customer wrapping their ETH and it becoming Arbitrum ETH
Without telling CoinLedger that this was a bridge transaction, our app would not know that these transactions were related-and thus, a Missing Cost Basis Warning would appear in this customer's account. Here's the solution:
Step-by-Step Walkthrough
Step 1
Head to the CoinLedger app, and navigate to the Review stage.
Step 2
Filter for the assets and/or platforms in question. Using the above example, the customer would filter their account for the assets ETH and Arbitrum ETH, as well as the platforms Coinbase and 1Inch.
Then, identify each Withdrawal and Deposit transaction that show how you bridged the asset - that is, withdrawing the original asset and depositing the new version of the asset on the new chain. The amount and timestamp for this withdrawal and deposit should be similar, if not equivalent.
Once you've located each transaction, select them as shown below.
Finally, at the bottom of your screen select Merge and then Bridge. This will create a bridge transaction between the two assets. In the example from earlier, this action would create a bridge trade of ETH for Arbitrum ETH, and would resolve the Missing Cost Basis Warning on that customer's account.
NOTE: This is the conservative approach that treats the bridge as a taxable token swap and makes the fair market value of those bridged/wrapped assets at the time you received them your new cost basis moving forward. If you're interested in learning more about how bridges are taxed, check out this walkthrough.
How to tell a transaction was not a bridge
Some transaction types can't be marked as a bridge. These include:
Transactions between assets on the same blockchain. Trying to merge transactions whose assets belong to the same blockchain will result in an error. Instead, you can mark these as a trade, as shown below.
Token updates. Token updates are not bridges and can't be marked as a bridge within CoinLedger.
Merging Other Transaction Types
Merging Transactions Into a Trade
If a trade was incorrectly imported into CoinLedger as two separate transactions, such as a deposit and withdrawal, you can merge those transactions to apply the correct cost basis to that asset on your account.
For example:
Let's say you purchased ETH using USD via PayPal in your MetaMask wallet.
However, this transaction was imported into CoinLedger as two separate transactions:
A withdrawal of USD from PayPal
A deposit of ETH into your MetaMask account
This isn't a fault with CoinLedger, but is due to the complexity of importing transactions from services such as MetaMask which use fiat on-ramps to allow customers to purchase crypto using fiat.
Here's the solution:
Step 1
First, head to the Transactions step of the CoinLedger app. Then, locate the withdrawal and deposit transactions in question.
Step 2
Mark the two transactions as shown below, and then select Merge.
Finally, select Trade. This will create one trade transaction.
π‘ Tip: You may have to add fees to the transaction if they aren't already included.
Merging Transactions Into a Transfer
Using CoinLedger's merge tool, you can also merge two self transfers together into a single Transfer transaction. This is useful if you want to represent a transfer from one wallet or exchange account you own to another wallet or exchange account you own in CoinLedger.
For example, sending Bitcoin from your Coinbase account to your MetaMask wallet would be a self transfer; however, it will get imported into CoinLedger as two separate transactions: one withdrawal and one deposit transaction.
While self transfers are non-taxable transactions and won't impact your tax report, having the ability to merge deposits and withdrawals together as Transfers ensures that your transactions are properly represented in your CoinLedger account's interface.
Here's how:
Step 1
From the Transactions page, locate a set of corresponding deposit and withdrawal transactions. These are the two transactions you'll merge into a Transfer.
For example: let's say that back in 2021 I sent 0.244 LTC from my Coinbase account to my Crypto.com account. This single action gets imported into CoinLedger as two separate transactions: one, a withdrawal of LTC from Coinbase, and another, a deposit of LTC into Crypto.com. If I want to merge these transactions into a single Transfer transaction, I'll first need to locate them on the Transactions page.
Here are those two transactions located in my CoinLedger account:
Step 2
Once you have located the deposit and withdrawal transactions needed to make a single Transfer transaction, mark the two transactions as shown below, and then select Merge from the pop-up menu at the bottom of your screen.
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Step 3
Finally, press Transfer.
Now, my deposit and withdrawal transactions have been merged into a single Transfer transaction.
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