How to classify interest from a deposit

in dYdX, you can deposit certain cryptos and gain interest on them. Since the value changes when you withdraw, The system doesn’t see it as an internal transfer. So how do you categories both transactions so that you’re only taxed on the interest in the US?
For Example:

1/1/2021 Deposit 100 USDC into 3rd party wallet 0x1234…
3/1/2021 Withdraw 102.5 USDC from 3rd party wallet 0x1234…

The taxable difference should be $2.50.

Here is how I do it…
Manually create a wallet and call it something like “3rd party wallet 0x1234”
Then either build a spreadsheet if you have many transactions, or manually input transactions into your new wallet via Accointing’s webform.
Match up the transactions you want to be internal with the same time and amount.
Example: if you withdraw from your wallet to the third party wallet, then you need to create the transaction in your manual wallet as a deposit. I would not create it as an internal transaction, because then later you will have to ignore a bunch of transactions. Once you finish creating all your transactions within your manual wallet, save. Then go to your review section on your Accointing account and click on the step 2 section “Identify Internals” and you will see the pairs of transactions to confirm as internal.

The interest transactions within your 3rd party wallet will also need to be created within your manual wallet.

Hope this helps.

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Thank you it does. To clarify, in this example, you would put in 1 deposit transaction and 2 withdrawls (one for the same amount of as the deposit and one for the interest)?

With this example you would create 1 deposit, 1 deposit classified as interest or income, 1 withdraw