Numerous revenue streams exist in the cryptocurrency industry. You can make money by buying coins at a low price and selling them at a higher price, by holding onto coins for the long term, or even by mining your own currencies. However, one of the most popular methods of making money in crypto is trading.
To help you make the most of your trading career, we’ve put together this guide on how to figure out how much money you’ve made trading cryptocurrencies.
Basics of Crypto Profit Calculation
First and foremost, investors must be aware of the costs associated with their trades. There is a transaction cost associated with using an exchange platform that must be incorporated into any potential earnings. Moreover, crypto price fluctuations might turn a trade that seemed advantageous at first into a loss in a flash.
Traders should know how much they can afford to lose before putting money on the line. More risk equals more potential gain, but also more potential loss.
How to Effectively Do It?
Keeping tabs on your cryptocurrency gains and losses can be done in a number of different ways. Using a blockchain explorer like Blockfolio or CoinMarketCap is a common practice. You can check the prices of the coins you own and view a record of all your trades and transactions with these apps.
Keeping a ledger of your crypto trading transactions is another option. All of your transactions and the details associated with them (date, price, amount, etc.) can be entered manually. While this approach may take more time, it is better for keeping track of your financial gains and losses.
Various Cryptocurrency Profit Calculation Methods
Calculating your gain or loss on cryptocurrency investments is easy if you follow the guidelines below.
Keeping track of your trading results in a spreadsheet will not only help you see the exact amount of profit or loss but will also reveal any patterns in your trade.
Start by making a new spreadsheet and adding columns for the date, the coin or token traded, the purchase and sale prices, and the gain or loss. Add a new entry to the spreadsheet each time you make a deal to keep track of the details. As time passes, you will be able to assess how successful your trading has been.
There are a variety of bitcoin calculators that help simplify the process of calculating your crypto profit. The current market value of the coins, the number of coins you own, and any fees or taxes that may apply are all taken into account by these calculators.
That’s why their estimates of your entire profit are more reliable. It’s important to find a bitcoin calculator that works for you out of the many out there. A calculator can help you keep tabs on your cryptocurrency earnings and guide your investing choices.
Unrealized profit is a common metric used by cryptocurrency investors to evaluate performance. The profit you haven’t yet realized is the difference between how much a coin costs you and how much it’s worth right now. Let’s pretend you invested $100 into a newly issued currency. The value of the coin subsequently quadrupled, making your potential unrealized profit $100. Your unrealized gain would be zero if the price dropped back down to $100.
The unrealized profit is often the sole metric investors look at, although this can be deceptive. An increase in a coin’s value does not necessarily translate into profit. You need to add together your realized profit and your unrealized profit to get your true profit.
When you acquire bitcoin, you’re purchasing into a decentralized network. There’s a lot of profit and loss potential. How can you tell if you’re investing wisely? Mathematically.
First, calculate how much each coin cost. Find the unit price. In order to calculate the percentage of profit, you made, first, divide the current price by the price you paid, and then multiply the resulting figure by 100. Buying one bitcoin for $500 and selling it for $1000 would result in a 200% return.
You’ve doubled your money. It’s crucial to be up-to-date on cryptocurrency pricing before making any judgments. Using this simple method, you can rapidly assess possible earnings and losses.
Subtract the purchase cost from the selling price to determine cryptocurrency trading profit. The buying cost comprises the cryptocurrency’s price and fees.
The selling price is the cryptocurrency’s price minus costs. For instance, if you buy a cryptocurrency for $100 and then sell it for$120, you would have made a $20 profit. If you sell for $5, your net profit is $15. To determine bitcoin trading profit, subtract buying costs from selling prices.
Importance of Tracking Profits and Losses
Keeping tabs on your gains and losses is an essential skill for anyone planning to invest in cryptocurrencies, and here’s why.
Assess Overall Performance Better
By monitoring your profits and losses, you can determine which coins are worth investing in and which are not. Moreover, you can utilize this data to inform your future financial decisions.
If you find that you consistently lose money when buying a certain coin, you may want to stop doing so. Keeping tabs on your earnings and expenditures can help you assess your performance and plan for the future.
Due to the ever-changing market, it is crucial to keep track of your gains and losses in order to reduce your taxable income. Using crypto tracking software is one option.
You can enter your purchase and sale instructions and transaction costs into this program. Your capital gains and losses will be determined from the data you provide. It is important to keep accurate records of your crypto tax payments to avoid paying too much or too little in tax obligations.
You can’t make educated decisions regarding your bitcoin holdings without first keeping tabs on your gains and losses. Monitoring your progress will allow you to change your tactics as needed and keep you abreast of your financial standing at all times.
One of the most useful tools is a profit and loss (P/L) calculator, which may help you keep tabs on your financial standing and make adjustments as needed. You can use this calculator to determine how much money you made or lost on each trade. Having this data at hand can be invaluable when deciding which coins to purchase or sell.
Robofi is a Defi platform that envisions a marketplace for revolutionary Dao crypto trading bots. Through its IBO (Initial Bot Offering) system, community members can maximize their earnings in an easy, simple, and secure way. We create a safe and transparent environment based on blockchain technologies that help developers bring crypto trading bot platforms to the market. In addition, individuals will have easy access to these bot applications, thereby generating more earning opportunities. RoboFi ecosystem is fueled by the VICS token.
VICS token has a distinctive and enticing concept. VICS is the BEP-20 token, built on the Binance smart chain. It is a core utility token in the RoboFi ecosystem, the reliable crypto trading bot marketplace. One important utility is to own the governance token of DABots and participate in an IBO (Initial Bot Offering) to receive additional incentives. VICS is available on major exchanges for trading.