What a block was worth before the market opened

Not tax, legal or financial advice. This is one reader’s worked example under US rules, from public exchange data, written so you can check every number. The author is a hobbyist, not a tax professional, and the IRS has not addressed this situation directly. Your facts and your country’s rules differ. Ask a professional who knows them.

The BLAKE2b chain activated on August 30 and paid a reward with every block. No exchange listed the coin until September 1, and the first trade printed at 15:00 UTC that day. A US miner who received a reward before then has income to report for 2026 and, for those blocks, no price to report it at. What number, and by what reasoning? The same problem meets every miner of every new chain, so this is written for them too. Everything below is US tax reasoning. Other countries tax mining differently, some at disposal rather than receipt, and the method does not carry over.

What the IRS has said

Three documents apply. Quotes are from the PDFs, linked.

Notice 2014-21, A-8, page 4: “when a taxpayer successfully ‘mines’ virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income.” A-5, page 3, says how to find that value: “If a virtual currency is listed on an exchange and the exchange rate is established by market supply and demand, the fair market value of the virtual currency is determined by converting the virtual currency into U.S. dollars (or into another real currency which in turn can be converted into U.S. dollars) at the exchange rate, in a reasonable manner that is consistently applied.” The same value is your basis in the coins (A-4).

Revenue Ruling 2019-24, written for airdrops, fixes the moment of receipt: the coins are received once the taxpayer can “transfer, sell, exchange, or otherwise dispose of” them, and “the taxpayer’s basis in the property received is determined by reference to the amount included in gross income, which is the fair market value of the property when the property is received.” Revenue Ruling 2023-14, written for staking, says the same of validation rewards: “The fair market value is determined as of the date and time the taxpayer gains dominion and control over the validation rewards.”

A coinbase output cannot be spent until 100 more blocks are mined. In this chain’s first week 100 blocks took between one and four hours, so most rewards matured on the UTC day they were mined and one mined late in the evening matured the next. Under the two rulings the maturity time is the receipt. A miner paid by a pool receives the coins when the pool’s payout lands.

The IRS FAQ on virtual currency fills in what “reasonable manner” means when a market exists. Q26: coins received through an exchange take “the amount that is recorded by the cryptocurrency exchange.” Q27: for everything else the IRS “will accept as evidence of fair market value the value as determined by a cryptocurrency or blockchain explorer that analyzes worldwide indices,” and “if you do not use an explorer value, you must establish that the value you used is an accurate representation of the cryptocurrency’s fair market value.” Q28 covers a coin “not traded on any cryptocurrency exchange”: it takes the value of the property or services exchanged for it. Mining exchanges nothing, and no index covered this coin in its first week. For a reward received before September 1 the guidance runs out at Q27’s last sentence: establish the value yourself, and be able to show why.

The first eight days of price

NeoxEX opened the first market, XBT against USDC, on September 1. Its API labels the pair BTCB2_USDC and returns the whole history to anyone. The 15-minute candles give this, by UTC day:

The VWAP is a proxy. The exchange publishes candles, not the trade list, so each candle is priced at (high + low + close) / 3 and weighted by the coins traded in it. September 1’s high is a few prints at bitcoin’s own price on 0.0005 coins in total; leaving them out moves that day from 103.00 to 102.47. A second exchange, NonKYC, opened an XBT/USDT market on September 5, and its daily closes since have run within 15 percent of NeoxEX’s. Two outlets reported the first day on their own: cryptonews.net at 10:56 UTC on September 2 had the coin “trading at approximately $82”, and Bitcoin.com News that day had it “started trading for around $80 per coin”. Both match the candles.

NeoxEX is small, new and custodial, and its first week brought public complaints about deposits and a warning that called it high-risk. None of that is a recommendation to use it, and this post makes none. It is named because for four days it was the only place the coin traded, which makes its prints the only evidence of value there is.

One method

Fair market value on the date of receipt is the volume-weighted average price for the UTC day of receipt on the most active USD-stablecoin market. Where no market existed on the day of receipt, use the VWAP of the first day the coin traded anywhere. Apply it the same way to every reward.

Why each piece. A-5 asks for a rate “established by market supply and demand”, which means trades, not bids, asks or price talk on X. Weighting by volume stops one print from setting the number: on September 3 the day closed at 400 and traded at 283. The calendar day rather than the hour of receipt because two hours on September 2 held under a coin of volume each; the day is the better measure of what a buyer would pay, and where both exist they can sit side by side (on September 3 the 15:00 hour traded at 282.26 against the day’s 282.74).

Set aside, with the reason. Zero: the coin had value before its first trade, since it traded near 100 within hours of listing and people were arranging trades before that, and zero income with zero basis is the position most likely to be challenged. The daily close: one print on a thin book. A later, higher price: September 5’s 1,799 is not the date of receipt. The BTC pair: thinner, not USD-denominated, and needing a second conversion; at Coinbase’s daily BTC close it ran 145 on September 2 and 366 on September 3 against the USDC market’s 124 and 283. An aggregator’s price: none covered the coin until NonKYC opened.

The weak link

The pre-market rule is the part the IRS has not addressed and the part to expect to defend. A reward received on August 31 takes September 1’s number under this method because that day is the nearest actual evidence, and one number applied to every pre-market reward is easier to defend than a curve nobody can source. Someone else could argue for September 2, the first full day, at 124, or for the first week’s average. No ruling or case found either way. Write down which you chose and why, and keep the candle data you used. Exchanges relist, delist and vanish, and the API returns nothing after that.

A hypothetical reward

One block subsidy, 3.125 coins, received on each of three dates:

The maturity rule bites here. A block mined at 22:00 UTC on September 2 matured about three hours later, on September 3, and takes the third row, not the second.

The same coins were quoted at 1,799 four days later and at 300 a week later. Neither is the number on the return. Basis was set the day the block matured; everything after is gain or loss against it, with the holding period running from that day.

Whether mining is a business or a hobby is a separate question with its own test, FS-2007-18, which Notice 2014-21 points to in A-9 and A-10. It does not change any of the values above.

Not advice

Nothing here is advice. The reasoning above is one way to read Notice 2014-21 and two revenue rulings against a coin that had no market on the day it was mined, written by a hobbyist, not a tax professional. The IRS has not addressed this situation directly. Other readings exist, other countries have other rules, and a method that is reasonable for one taxpayer may not be for another. Keep your own records, keep the exchange data you relied on, and get professional advice before you file.

Discuss this post on X

Saved you an hour? Tip the node and the clankers.