The law states you only owe taxes on 'sold' assets. But say during a tax year, I buy Bitcoin, then trade that Bitcoin for Ethereum, and then trade that Ethereum back into Bitcoin. Do I now have to pay on the gain from that trade even though I haven't sold back into dollars?
it depends if you bought with traceable fiat money i.e. through an exchange with your credit/debit card,Paypal through Coinbase or similar service
but if you mined the coins then deposited them to an exchange,there is no way IRS will ever be able to trace it unless you declare it yourself
even then there is no clear law on how to treat bitcoin earnings and what tax has to be paid and in what cases
if you want to be a law obiding citizen you can ask a lawyer in your state,but I doubt you would get a definitive answer