For those that trade the asset, the notion of crypto profit and loss is rather simple. When you sell or dispose of your crypto asset, you may make a profit or a loss.
Crypto trading, like any other company, is typically motivated by the desire to earn a substantial gain or profit. Nonetheless, given the risks associated in the business, there is a chance of losing money if the proper option is not taken as a consequence of misguided or misdirected preparation.
The consequences of such losses can be fairly visible, especially when the amount spent is substantial. As a result, everyone trading bitcoin must understand how to quantify losses and gains. Failure to do these calculations will result in a blind investment and trading issues since you will not know when the timing is right to sell assets and make money.
Notably, the notion of crypto profit and loss is simple for those who trade the asset. You make a profit or a loss if you dispose of or sell your crypto asset. You make a profit when you sell your cryptocurrency for more than the price you paid for it. On the other side, you lose money if you sell it for less than what you paid for it.
Crypto Profit And Loss Calculation
Knowing and considering your breakeven price is a wonderful place to start when estimating profit in crypto trading. This is critical in defining proper contrast to decide whether a profit or loss should be reported.
Consider the following basic illustration. Assuming you purchased one Bitcoin at $32,000 a month ago, this is your breakeven price. When you check the market data today and see that the price of a Bitcoin has risen to $33,000, you may calculate your potential profit by deducting the breakeven price from the current market value.
Subtraction of $32,000 from $33,000 yields $1,000. It indicates that if you sell your bitcoin right now, you may make $1,000. Then you may choose whether to sell and collect the profit immediately or to hold on to your BTC in the hope of earning more.
There are various more profit and loss measures that must be considered when determining your cryptocurrency earnings. As a result, in addition to calculating your cumulative earnings, you may need to employ some other indicators, depending on the goals you specify. Among the metrics are:
A realised profit is one made on coins that have already been sold.
Average sale and purchase prices
The total profit is the sum of realised and unrealized profit.
Unrealized profit is the profit derived from calculations based on the current market price.
Making Use of Unrealized Profit
Many times, crypto traders grow impatient and decide to grab profits and exit the market, even though the market is trending upward. Other traders fail to sell their bitcoin holdings when they should. Given the market’s volatility and opposing potentials, it is critical to keep a continual eye on and assess the market.
Assume you purchased BNB for $140 and it has since increased to $170. You would have already made a $30 profit. However, you have yet to sell the assets, thus you have not made the profit until you sell the assets at these prices.
Likewise, the BNB price may fall somewhat or fall below the price at which you acquired it. For example, if you paid $160 for BNB and the current market price is $140, you lost $30. Nonetheless, you are not actually losing money if you do not sell the assets.
Percentage Profit Multiplication
A greater proportion of cryptocurrency traders choose to calculate their crypto profit and loss using a percentage approach. To do all of this, multiply the percentage growth in the value of your crypto asset by the percentage increase in its value.
To do so, multiply the price at which you buy the cryptocurrency (the entrance price or breakeven price) by the relevant percentage expression. For example, if you buy BNB at a $2 entrance price and only want to earn 10% profit on the deal before selling your assets, you must multiply your entry price by the same 10% profit percentage.
As a result, the entering price of $2 multiplied by 1.1 equals the exit price. Your assets’ worth would therefore be $2.2, less the entrance price, for a profit of $0.2. When multiplying by a hundred, the rule of thumb is to add the number 1.