Crypto bookkeeping software is an obvious solution to this problem of increasing complexity. There are great tools allowing you to easily manage multiple crypto exchange accounts without any issues, but you also need additional instruments that help you keep track of expenses and remittances that you make outside of orderly CEX and DEX platforms.
Why do we need these kinds of programs?
In 2024, the global market for these tools is expected to reach $4.94 billion as more companies become members of the growing ecosystem. The interest from financial institutions and the increase in small-scale operations indicate the intensifying rate of adoption. At the same time, compatible blockchain solutions are implemented everywhere. This interconnectedness creates a chaotic environment without millions of cash flow channels that are quite hard to keep track of.
Dealing with thousands of tokens, transactions, and addresses can be overwhelming even for veterans. We all need the assistance from highly specialized applications designed to help vendors, senders, and receivers of digital assets manage their operations easier while keeping everything in order. On the other side of the issue, retail traders who actively work in the ecosystem often face incredible challenges as the number of accessible financial instruments is constantly growing.
When you buy or sell different tokens and coins, keeping track of Bitcoin and Ethereum seems easy. However, when the list of traded assets increases, managing gains and losses turns into a tedious task that does not tolerate mistakes. Compared to investors operating in the field of TradFi, we trade on the “hard mode” and have to deal with high volatility, numerous exchanges, and a market that never stops to catch a break.
Cryptocurrency bookkeeping software comes in handy and helps us all in several ways:
- Apps are better at understanding complex systems. Since many tokens are accessible on multiple CEXs and DEXs as well as P2P marketplaces, managing different history formats and comparing ledgers can be quite time-consuming. Many contemporary investors deal with high volumes by using automated systems for all sorts of instruments including futures, options, staking, and more. The variety and amounts of transactions make it hard to avoid errors. By using applications specifically designed to deal with these issues, we significantly reduce the likelihood of making a critical mistake.
- You can file your taxes while you are at it. Each nation has its own set of regulatory practces controlling operations with digital assets. Some of the most intense juridical environments is in the US where the IRS demands all citizens to submit their gains and losses anytime they dispose of their holdings. The US’ IRS system is notorious for its complicated nature and sever consequences for making mistakes. It is a much better solution to use products that precisely calculates everything you need for a return according to the applicable frameworks. Experts estimate that up to 80% of all traders do not fully understand the implications of their in-market operations.
- Abide by law and order. The character of regulations is toughening all over the world with many EU citizens having to abide by the KYC recommendations and anti-money laundering regulations. These limitations go against the very core of the philosophy that gave Bitcoin its initial boost as many early adopters were enthusiastic about $BTC precisely due to its anonymity and privacy. Regardless of how you think about this whole debacle, in many regions you must adhere to certain juridical railways and pay attention to the history of your transactions. It is much easier to do it with the help from specialized programs.
- Easier portfolio management. We all know that using effective techniques to keep your portfolio in order is critical for the success of your investment activities. While experienced investors may have an easier time tracking their holdings and their performance, it is often a much more reasonable approach to use advanced services that keep track of market data, performances of different holdings, recent operations, and analytics. Again, keeping records appropriately can be quite complicated and using tools is necessary to ensure that you have the full picture of your investments.
- Stay safe and do not risk losing sensitive information. The permissible, immutable, and fully decentralized nature of many coins feels quite appealing to many newcomers. However, they soon face the difficulties of self-custody where the responsibility for the safety of funds under management burdens only your shoulders. Making sure that you can keep track of all holdings in one single place that uses the best security measures like data encryption, two-factor authentication, and backups is one of the best ways to avoid problems related to safety and confidentiality.
- Integration with a variety of other valuable services. People in our industry often have to work across multiple institutions and interact with both DeFi and TradFi platforms. This complicated approach requires a special set of tools that allow for comprehensive planning and further record keeping. Many currently existing programs can easily communicate with popular services like QuickBooks, Xero, TurboTax, and many others. This interconnectedness allows all users to optimize their workflows and keep track of all their holdings while never worrying about appropriately submiting their activities to the authorities.
The complications that arise when you try to liquidate your holdings on CEXs and DeFi protocols and secure profits in fiat often confuse newcomers and even veterans living in countries with strict codes. Bitcoin accounting software helps us navigate the dark forest of regulatory guidelines and find the right way to submit the outcomes of your investment activities.
Business owners allowing users to pay in BTC, ETH, or USDT also struggle with bookkeeping and often have chaotic recordings of their earnings making it hard to keep track of bottom lines and analyze the performance of the business. There are many reasons to use these advanced programs.
How to pick the most optimal program
Finding the right toolkit for your bookkeeping needs can be challenging due to the number of vendors offering their expertise and toolkits to everyone working with various tokens and coins. Nevertheless, it is possible to find a good product by following our very simple 3-step guide on how to select a vendor that will give you the best value for your dollar.
1. Start with assessing your requirements. It is important to understand the character of your investments and their structure. Capital holders operating with complex portfolios must use applications that can handle such data easily. Compliance is another important topic for investors who want to work in accordance with law. Also, make sure to use services that can be integrated with other services without any issues.
2. Pick features that you need. The biggest frustration for many individual traders is the necessity to manually input data in their spreadsheets. Automated data importing solves this problem. Other investors may require unique functionality like real-time calculations. These can be handy since over 80% of all retail traders do not know how their trades affect taxes. UX/UI, customer support, and security should also be considered.
3. Review all providers and check whether they suit your requirements. Using testimonials from users, professional reviews, and discussions on social media helps you make the right choice and avoid bad products. We also recommend personally testing the customer support system by inquiring about the service before committing to a subscription.
For many contemporary investors, the necessity to use a program that expedites the data gathering and importing process is hugely important. The reason is simple: anyone can use an automated cryptocurrency trading bot to reach high volume of operations and become overwhelmed with the sheer number of trades that have to be recorded and managed. An efficient blockchain accounting software will help with increased volumes of operations and handle the data effortlessly.
The list of top crypto accounting tools for 2024
The variety of programs available to those seeking convenient applications is quite big an makes it hard to find brands that deserve your attention. We decided to assist you in the quest of finding the right tool for the job by making a list of several applications that will suit the needs of the vast majority of people owning BTC, ETH, and other similar valuables.
Koinly
Founded in 2018, this platform is known for its functionality that allows specialists and laymen to easily calculate the outcomes of liquidating holdings and determine what you owe to uncle Sam. Koinly can extract data from over 700 different sources including 400 CEXs and over 100 wallets. Additional features include portfolio tracking, basic analytics, and automatic calculation based on the framework that you prefer.
The free plan is also there for people with less than 10 thousand transactions but you won’t be able to form the necessary documents without a paid subscription. Koinly supports a wide range of financial instruments including NFTs. Users on various review aggregators have a high opinion of this company with many praising it for convenient UI and useful free features.
SMPLR
When it comes to finding the right cryptocurrency accounting solutions, this service is a life saver as it offers a lot of useful functionality in one place. The best thing about SMPLR is that it manages to significantly simplify the data gathering process by processing information directly from blockchains, offering bookkeeping tools for fiat and coins, and offers comprehensive overviews by the end of each month.
If you link your banks, wallets, and CEXs to SMPLR, you will have all your operations neatly categorized and automatically ordered. Many of the features are available to free users during a lengthy trial period. The lack of additional features may be inconvenient to some users.
ZenLedger
It is an underappreciated platform that does not enjoy the good will of users. To be honest, we do not know the cause of the hate as it is one of the best convenient programs for keeping track of your financial activities and submitting crucial documentation in time and in multiple jurisdictions. The company was founded in 2017 by developers who believed that they can deliver a simple tool for portfolio tracking.
ZenLedger is integrated with over 400 different exchanges including giants like Binance and Coinbase, can read data directly from Ethereum, Algorand, and over 40 other chains, while also being compatible with DeFi protocols. There is also a free tier subscription that gives you access to some functionality but limits the number of integrations that you can use.
CoinLedger
Specialized cryptocurrency tax software for accountants is not a rare beast in the industry. However, services like CoinLedger are somewhat more useful than many others thanks to their focus on perfecting API connections and the ability to pull data from a variety of sources allowing you to quickly fill in and export forms. The service can get the data in real-time or extract it from compatible files containing the history of your transactions.
CoinLedger is integrated with multiple CEXs and blockchains and can track events like airdrops, gift receivals, forking, and more. If you are looking for a program that makes it easier to do returns, the paid subscription for this app is a good long-term investment. The only issue is that the company does not offer meaningful customer support channels and offers assistance only via email and live chat.
Glassnode
Founded in 2016 as a comprehensive toolkit for specialists operating with all sorts of coins and tokens, Glassnode is a good example of an online application done right. It allows for automatic filling of important forms like 8949, 1040, and others while optimizing forms for the best outcomes without breaking the IRS’ guidelines.
The portfolio tracker is packed with useful functionality allowing you to view the market sentiment, observe alerts in real time, and check the performance of your holdings. From the administrative point of view, it also provides detailed recordings of your activities.
With over 300 CEXs and DEXs supported by Glassnode alongside a variety of wallets, the onboarding process is seamless and takes just a couple of minutes. The absence of support channels may be an issue for some newcomers.
Ledgible
This app positions itself as a middle-of-the-road option for everyone from individual retail traders to corporate entities. Even experts in the field of IRS regulations may find the offerings from Ledgible quite useful as it automates many processes related to calculating what you owe to the government in regards to operations in the DeFi field. The data is comprehensively processed and packaged to be compatible with systems operating in the TradFi ecosystem.
In essence, Ledgible acts like a bridge between fiat and DeFi while allowing users to do everything without the need to ask for assistance from trained professionals. The only way to contact the support team (besides social media) is through the ticket system which can be very slow.
TokenTax
If you are all-in on things like Bitcoin and Ethereum and need some serious assistance from a service that can pull data from any source, TokenTax is a good choice as it is integrated with all relevant exchanges in the industry and even obscure marketplaces like OpenSea. While the information is primarily gathered from these sources in real-time, you can also upload CSV files with the history of your operations.
The app automatically calculates capital gains and losses. It can autonomously generate 8949 or 1040 forms which you need to submit to the IRS for relevant returns. The versatile customer support system allows users to contact specialists using all kinds of channels including phone calls, live chat, email, social media, and more.
CryptoTaxCalculator
This online service is an excellent application connected to over 400 CEXs, a variety of wallets, decentralized finance protocols, and NFT marketplaces. The data pulling occurs automatically if you connect places where you store holdings. According to many users, the system rarely makes mistakes when generating forms and provides a very good live calculations whenever you need it.
All calculations are accompanied by detailed explanations allowing users to follow the complicated form creation process without feeling lost. Since the data is pulled from the DeFi ecosystem and CEX apps offering complex financial instruments, the app is considered one of the best at handling everything involving leveraged trading, staking, and lending/borrowing tokens.
CoinTracking
Founded back in 2012, this particular toolkit was designed to track limited holdings but had to evolve to a much bigger product as the industry became more complicated. Currently, Cointracking serves over 1 million customers from all over the world and offers their expertise to 25 thousand corporations. The app can generate real-time snapshots on the performance of DeFi instruments under your management, estimate the total value of your holdings, and calculate unrealized gains.
It is an international service and has specific frameworks for multiple countries. The data can be pulled from many sources or uploaded using standard CSV files. CoinTracker can indeed keep an eye on over 22 thousand different tokens.
Cryptoworth
The complicated landscape of the blockchain industry demands adaptation. As new regulatory frameworks complicate the process of keeping records, calculating what you owe to the government, and transaction auditing, the need for comprehensive systems that can handle all of that is growing in all regions even where regulations are not as strict as in the US, Germany, and UK.
Quick document generation is one of the best features of this platform as it quickly calculates unrealized profits, identifies reportable outcomes, basis cost, and all the necessary details for the form 8949 and 1040. When the document is generated, you can simply export it in a CSV or PDF format whichever is more convenient for you to use.
The complexity of the market and industry
It was once a niche uncharted territory with only enthusiasts and hardcore libertarians lurking around. However, the industry has turned into a behemoth with the value of products and platforms close to $4.5 billion and market cap of all tokens combined in the ballpark of a trillion (even more during a certain period).
Many things make it hard for retail traders to keep track of their holdings:
- The variety of assets and instruments. Each token has its unique utility, value, and technical characteristics. While the mainstream audience only knows about Bitcoin and Ethereum, less popular blockchains are often just as valuable. Alongside coins, we are also capable of engaging with the market for derivatives.
- Too many places to store tokens. Wallets for self-custody, balances on centralized exchanges, tokens locked in stakes in DeFi protocols, and more — a typical retail investor often uses up to five different storages. Consolidating information from so many sources is a time-consuming task which many fail to complete without any errors.
- The market operates around the clock and can be very volatile. The transaction history can be extremely complicated and confusing if you use automation. A modern machine learning crypto trading bot can conduct hundreds of operations each day making the history almost incomprehensible to a human. Using automated crypto accounting solutions is the only way to handle this volume of data reliably.
Applications that we have been discussing in this article can alleviate these problems. Here is how:
- Fully automated data aggregation and consolidation. Many services can easily pull data from multiple exchanges and wallets allowing you to view the overall balance of your portfolio and save you from the necessity to manually input tons of data.
- Automatic form filling. Any service like Koinly and CryptoTrader.Tax is equipped to generate forms within multiple national regulatory frameworks.
- Informative portfolio management. While you can use highly specialized instruments for portfolio tracking, many services like Koinly are capable of providing analytics and performance metrics just as a bonus.
The compliance with regulations is another important factor that decisively affects how valuable crypto financial reporting tools are to individuals and institutions.