Want to know how you can calculate cryptocurrency profit. Then, this is the definitive guide about what profit you can expect from your investment.
A command of numbers is required to determine your crypto trading profit and loss. Furthermore, you must constantly bear in mind that the fundamental purpose of cryptocurrency trading is to earn.
Calculating how much you gained (profits) and lost (losses) aids in portfolio balance.
But how do you go about doing these calculations? Calculating profit and loss is one of the most challenging tasks for traders.
But it doesn’t have to be difficult because we’ve figured everything out. Read and use the information provided here for the most remarkable outcomes.
Because cryptocurrencies fluctuate in value, it is critical to diversify a portfolio.
It is typically good to hold some of the largest and most popular cryptocurrencies, such as Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash, Ripple, and others.
Along with them, it makes sense to diversify as much as possible, trying to capitalize on new possibilities as they arise, such as ICOs and IDOs, and therefore new coins and cryptocurrencies.
It is critical to understand how to compute earnings, whether buying or selling, trading, swapping, exchanging, or mining.
In this post, we’ll look at the simplest ways to do so so you know exactly how much profit you’ve made on each transaction.
How Do You calculate Cryptocurrency Profits?
Profits in digital assets may be amassed in various methods, including long-term investments, trading, scalping, and mining.
Calculating crypto earnings is straightforward math. However, there are other considerations to speculate when calculating the gains and losses.
This post will go over how to calculate bitcoin profits and methods for keeping track of your investments.
Deduct the Selling Price from the Purchase Price:
This is one of the easiest methods for calculating your profit and loss in cryptocurrency. All you have to do is subtract/add the amount you sold the cryptocurrency for from the amount you purchased it for.
Let us use Bitcoin as an example (BTC). Assume Bitcoin is presently trading for $10,000. You invested $10,000 in Bitcoin and sold it when it reached $15,000.
You want to deduct the cost price (the amount you purchased) from the selling price in this situation. That is, you will subtract $10,000 from the selling price of $15,000.
The difference ($5,000) is your profit. You may use the same methodology to determine your loss as well.
Assume you paid $10,000 for Bitcoin in this case. However, it plummeted to $8,000, and you were concerned that the price might fall considerably further.
So you sold for that much. This notion implies you lost $2,000 in total.
Make use of Unrealized Profit:
Because the cryptocurrency market is volatile, some traders are eager to collect profits and exit the market.
Keeping a regular check on the market allows traders to see firsthand whether they are profiting or losing money on their deals.
However, concentrating on the market’s frequent fluctuations might prevent a trader from seeing the big picture.
Assuming you purchased Ethereum (ETH) at $2,000, maintain a close check on the market. If the price of ETH rises to $2,200, you have already made $200.
The only distinction between this and the subtraction model is that you have not yet sold. However, once your order is filled, the price of Ethereum (ETH) may fall somewhat or possibly plummet.
This occurs most of the time when the purchase orders exceed the sell orders.
For example, if you purchased ETH for $2,000 and it decreases to $1,800 after placing your sell order, you have lost $200.
This modification will have an impact on your profit and loss computation after the sale.
Multiply to get the profit percentage:
The bulk of bitcoin trading earnings and losses are reported as percentages. Here’s how you can figure it out:
Profits in bitcoin trading may be calculated by multiplying by the percentage rise. Multiply the price at which you purchased the cryptocurrency (the entry price) by the matching percentage expression.
Profit percentages ranging from 10% to 50% are represented as follows:
1.1 to represent 10%
1.2 for a 20% discount
1.3, which equals 30%
40% is represented by 1.4.
1.5 for a 50% chance
Assume you purchased Cardano (ADA) at the initial price of $2. You aim to make only 10% of the deal and then quit the market.
What you’ll do is double your entrance fee (the price you paid for your ADA) by the appropriate percentage profit of 10%. In other words, $2 (entry fee) multiplied by (x) 1.1 (10 percent ).
That offers you $2.2, where $2 is your initial investment and $0.2 is your 10% profit.
You may also do something similar if you want to profit 50% on the deal. In this situation, the equation is $2 x 1.5 = $3. Take out your $2 capital. You are left with half of the capital, which is $1.
However, you may compute a 100% gain/profit by doing the following: $2 x 2 = $4.
When multiplying by a hundred, the rule of thumb is to add the number “1.”
Make use of a Spreadsheet:
Using a spreadsheet can help you keep track of all of your wins and losses from crypto trading. You may categorize anything as follows:
- The names of the coins you bought and sold
- The exchanged units
- The cost of purchasing the coins
- How much did you earn from the coins?
- The date you exchanged them
Check the entrance prices (the sums you paid for the coins) and the selling prices at the end of the exercise. It would be evident if you made or lost money.
Think about using cryptocurrency calculators to figure out your profit and loss.
Do you believe a spreadsheet is too tedious or that employing the percentage profit or subtraction models is too complicated?
Then try utilizing some of the online bitcoin calculators to determine how much you gained and how much you lost from cryptocurrency trading.
These calculators can help you quickly calculate your profit and loss from cryptocurrency trading.
Determine mining profitability.
Mining cryptocurrencies, pre-ICO tokens, or IDO tokens differs from merely purchasing and selling existing cryptocurrencies.
Of course, you can, and millions of people do. Mining Bitcoin (BTC) and other cryptocurrencies are a way to make money, but it’s not as simple and needs more commitment than simply purchasing and selling bitcoin.
There are two approaches to this. You may either mine an existing cryptocurrency or stake (make a modest investment) and offer to mine a pre-ICO or IDO token, implying one that hasn’t yet launched.
This increases the risk, particularly before lock-in periods expire, the tokens are available and compatible with exchanges, and you may begin selling/exchanging these coins for other cryptocurrencies.
There are a lot of initial and continuing expenditures to consider while mining any cryptocurrency or coin.
Profits are earned long before any revenue is generated. To begin, you’ll need a strong computer or rig—the more powerful, and hence more pricey, the better. You’ll need one with the most hashing power feasible.
Ongoing costs include wattage consumption, operational costs per kWh, overall electricity expenditures, and pool fees.
Furthermore, suppose you are mining a pre-ICO or IDO token. In that case, you will generally be required to make a staked and locked-in minimum investment (either in fiat or another cryptocurrency).
After you’ve subtracted all of your expenses, you’ll have a profit. Using the BTC.com Mining Calculator or the CryptoCompare Calculator is one of the best ways to figure this out.
Use these to enter a variety of cost elements and have them create profit estimates.
Knowing How to Calculate Your Crypto Profit and Loss Will Help You Become a Better Trader.
One of the primary abilities that will help you become a better trader is calculating your revenue and losses.
Furthermore, you might strive to control your greed to increase your earnings and stop losing money.