Glossary / Markets & investing
Unrealized gain
Also known as Paper gain.
- Definition
- An unrealized gain is the profit shown in your account before you sell anything, a number that exists only at today's price and can vanish without you doing a thing.
Your cost basis is fixed the day you buy; the market price is not, and everything between them is unrealized. Anyone who bought at bitcoin's record above 126,000 dollars on October 6, 2025 has spent most of the time since holding an unrealized loss instead. Most tax systems ignore the figure until you dispose of the coins, and a few do not.
How it works
An unrealized gain is arithmetic, not money: current price minus cost basis, multiplied by the amount you hold.
The complication is that you rarely hold one lot. Buy 0.01 bitcoin every month for two years and you own 24 separate purchases at 24 different prices. Your app shows a single blended number, but a tax return usually wants the gain per lot, matched by an accounting method such as first in first out or specific identification. Which coins you notionally sell changes the result substantially, and in some jurisdictions the method must be chosen consistently rather than per transaction.
Currency matters too. If you earn in a currency that has fallen against the dollar, the local-currency gain on the same coins can be much larger than the dollar gain, and your tax authority will care about the local number.
Two things also convert an unrealized gain into a realized one without any cash reaching your bank. Swapping bitcoin for another asset is a disposal in most systems, and spending bitcoin on goods is a disposal too, which is why paying for a coffee can create a taxable event years after the purchase.
Where you see it
The unrealized number shows up in three places, and it means something different in each.
In your exchange or wallet app, it is a display. It uses one price feed, ignores fees paid, and often resets if you move coins between accounts, which is why it is a poor basis for a tax return.
In tax law, it is usually invisible until disposal. The United States taxes capital gains on sale, and broker reporting has been catching up: Form 1099-DA covers gross proceeds for transactions from January 1, 2025, with cost basis reporting added for transactions from January 1, 2026. Germany is the striking counterexample in the other direction, because under section 23 of the Income Tax Act a private holder who keeps coins for more than 365 days currently pays nothing at all on the gain, though the federal cabinet adopted a 2027 budget draft on July 6, 2026 that would move crypto into capital income and end that exemption.
In company accounts, it is income. Under the FASB fair value standard effective for fiscal years beginning after December 15, 2024, listed holders mark bitcoin to market each period, so an unrealized swing lands directly in reported earnings. That is why treasury companies now post enormous paper profits and losses that involve no trading whatsoever.
Unrealized gain vs capital gains tax
An unrealized gain is a measurement; capital gains tax is a liability, and only a disposal turns the first into the second. Holding through a 50 percent rise creates no tax bill in the great majority of the 231 countries covered on this site. The trap runs the other way: people who did realize gains during a rally, then watched the price fall before setting aside the tax, still owe on the profit they made in the earlier tax year. If you sell, separate the tax portion immediately, because the liability is fixed at the moment of sale and the price is not.