TL;DR
To record bridged or wrapped coins properly, enter them in three steps:
Use a Swap or Trade for the coin conversion
Record the Withdrawal from the source network
Log the Deposit to the destination network
Use Swap to avoid taxable events or Trade to trigger tax implications. Consult a tax advisor to determine which type applies.
What are Bridge Transactions?
Bridge transactions occur when you transfer coins across different blockchains or wrap them into new tokens—for example, converting ETH to WETH on the MATIC network. Because the tokens often use different tickers or operate on different chains, it's important to track these movements properly for portfolio and tax accuracy.
Swap vs. Trade: Which Should I Use?
You have two options in CoinTracking for entering these transactions:
Swap (non-taxable):
Maintains the original holding period
Recommended for wrapping and cross-chain movements that are not taxable events
Trade (taxable):
Resets the holding period
Triggers potential capital gains or losses
Note: Always check with your tax advisor before choosing the correct classification.
Step-by-Step: How to Enter a Bridge Transaction
Step 1: Enter a Swap or Trade of the Original Currency
This is the conversion of one asset to another in the same network (e.g., ETH to WETH on Ethereum).
Use "Swap" if non-taxable; use "Trade" if taxable.
Trade:
Step 2: Record a Withdrawal of the Bridged Currency from the Source Network
Log the withdrawal of the newly wrapped or bridged asset from the original chain’s wallet.
Example: Withdrawal of WETH from the Ethereum wallet.
Step 3: Record a Deposit of the Bridged Currency into the Destination Network
Log the deposit of the wrapped or bridged asset into the wallet on the new network.
Example: Deposit of WETH into the MATIC wallet.
Examples
ETH (Ethereum) → WETH (Polygon)
BTC → WBTC
USDT (ERC-20) → USDT (TRC-20)
ETH → stETH
Disclaimer: Please note that we are not tax advisors and are therefore not permitted to provide tax advice. The information contained in FAQ is for general information and technical support in using the CoinTracking software only. It does not constitute tax or legal advice. Please contact a qualified tax advisor with any tax questions.