Successfully managing your cryptocurrency portfolio is key to making a profit. If you’re an investor prone to wild splurges and sentimental trades, there’s a strong chance that you’ve been accruing heavy losses.
As a cryptocurrency investor, the goal of all your investments is to make money. Purchasing cryptocurrency is meaningless without it. In this case, you’d be better off putting your money into real-world equities.
If you have no fixed way to determine whether you’ve made a profit or loss, you’re running a risk of losing all of your crypto assets.
Calculating your crypto trading profit and loss using a digital calculator is one of the best ways to monitor your assets’ performance.
Making Loss or Profit
The basic aim of every financial trader, crypto included, is to generate a profit. You speculate on the direction of the market trend when you trade on the crypto market.
If the market has been bullish for a time, you can benefit handsomely by selling assets that have appreciated in value. Trading in a negative market, on the other hand, will result in some losses.
The easiest part of your crypto trading journey is when you first create your wallet and begin to buy coins. Some like to start out with big-name tokens like Ethereum and Bitcoin. However, the top coins are for those with heavy capital to shell out. Transactional accounting should be used to calculate losses and gains.
You should determine the trade value and cost basis in the fiat currency you used for the purchase for each investment transaction. The cost basis and value differential can then be compared to identify losses or gains.
For those without, it’s ideal to start out with a coin or coins within a budget range. Improper planning and a failure to note the financial specifics of each investment can lead to ruin. This is evidenced in the fact that most traders run on losses, with small profits outweighed by heavy losses.
Losses occur for several reasons. The cryptocurrency market is incredibly volatile, and prices change hourly. If you’ve been trading the wrong coins, you’re on the wrong path.
Recently, the cryptocurrency LUNA took a massive hit, dropping by nearly 100%, as an astounding statistic for a crypto asset. Investors with major holdings in the token have been the most affected, making unprecedented losses.
On the other hand, investors with a part but not all of their portfolio in LUNA may be able to stem their losses better than those without diversified portfolios.
Another reason why investors make losses is a failure to withdraw profits on time. As stated earlier, cryptocurrency is highly volatile.
As the market prices change, it is imperative that you make good on profitable withdrawals whenever the opportunity comes, if that is your investment strategy. If your withdrawals are not timed strategically, you’ll miss out on the most favorable price spikes, losing money.
For this reason, any serious investor knows the importance of monitoring the charts. On platforms like CoinStats, it’s easy for users to access live price updates, and information on supply, market cap, and trading volume per hour.
The most popular way to forestall potential risks and losses is to invest in several coins. For example, you can invest in Bitcoin and other altcoins like Ethereum, Litecoin, and Dogecoin. Alternatively, you can go for the minimized risk in stable coins, or invest in several altcoins, rather than Bitcoin.
No matter the strategy that you employ, you still need a good way to calculate your crypto profits. Here are the ways to go about it.
You can calculate your crypto trading profit and loss using the simple mathematical profit formula: selling price minus cost price.
As far as calculating your crypto profit and loss goes, this is as easy as it gets. Simply subtract the cost of the crypto that you sold from the cost of its purchase.
For instance, an investor purchased $200,000 worth of Bitcoin and sold it at $400,000 when the market turns bullish. In this case, the investor has made a 100% percent profit, earning $200,000 in addition to a similar initial outlay.
On the other hand, if the market turns bearish and the value of Bitcoin drops, the same investor may have to sell the BTC at a lower price. If the person sells the coins for $100,000, that is a 50% percent loss, equal to a full half of the initial investment.
Use a Crypto Calculator
Many exchange platforms and digital wallets offer calculator tools for investors to monitor their earnings. Platforms like CoinStats offer these tools, making them readily available to subscribers to the platform.
The best part is that it’s totally free to use.
Another way to calculate your losses and profits is by monitoring the percentage increase or decrease.
If you have percentage profits ranging from ten to fifty percent, you can express it in decimals between 1.1-1.5.
Another efficient way to calculate your loss and profits is to organize all of your data into one spreadsheet. On it, you’ll break down the data according to the categories, organizing it into different sections based on factors like coin name, units traded, cost per coin, coin selling price, and date traded.
Afterward, you can compare the losses and profits by weighing the selling prices against the cost price.
Calculating your profits and losses is a serious aspect of crypto investments. So, while you focus your attention on the markets, looking to take advantage of a dip or a spike, remember to keep it real by calculating your profits and losses.
It costs a lot of money to power up so many powerful computers. As a result, you’ll need to make sure you can compete with other miners on the network to solve transaction validation challenges.
Keeping in the green is important. Don’t get in the red!