How will the IRS know about the capital gains that happened within your wallet?

for example,

1. you buy $2000 worth of ETH on an Exchange
2. you immediately send it to your private wallet
3. you leave it in your wallet for 6 months and it is now worth $5000
4. you send this $5000 value back to the Exchange account and withdraw the cash

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If i'm not mistaken aren't the only taxable events

1. The transaction from the Exchange to you're wallet (maybe the value went from $2000 -> $2001 making the capital gains tax on the $1 appreciation)
2. From the Exchange to your bank (maybe the value went from $5000 -> $5001 making the capital gains tax also only affect the $1 of appreciation)
3. This would mean that you have a total of $2 worth of appreciation and if a capital gains tax of 30% is applied, then you pay a total of 60 cents in taxes but went up a couple thousand.

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How else would the IRS know what the value of what is stored on your wallet went up by? Unless you reported it yourself. Or if they were actively monitoring your wallet address, which I don't think they do.

If anyone has any more resources or if this is a double post, please let me know! I couldn't find any info on this online.