Becoming a part of the cryptocurrency industry is a step that more people are making on a daily basis. While a lot of uncertainty still lingers about cryptocurrencies, millions of people are ready to invest in digital currencies.
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The choice of crypto to invest in is one dilemma most new investors and enthusiasts battle with, which is why the first purchase of new adopters usually falls between Bitcoin and Ethereum. You can look through CoinJournal, and there are tons of resources to give you the heads in making more profits in your crypto trades.
As they proceed into the world of trading crypto as traders or HOLDers, a vital question starts to linger in their mind; how to calculate their crypto profits. Is this even possible? And what are the easiest ways to get this done?
There are two approaches to calculating your crypto profits; fiat currency and Satoshi/Bitcoin price.
- Through Fiat
You can value your gains or losses in your legal tender. The common local currency is the United States Dollars (USD), Great Britain Pounds (GBP), Japanese Yen (JPY), Euro (EUR), and many others.
To calculate your crypto profit using these methods is being aware of the value of the crypto in your local currency. This is why most people assert that measuring or taking profit in BTC value is the most accurate.
- Through Bitcoin/Satoshi
There are numerous coins in the Cryptosphere today, and not all can be acquired using a local currency.
Through Bitcoin, most of these coins can be purchased. In essence, Bitcoin is the base of all cryptocurrencies and the gate to the crypto world.
Not to worry, we’ll discuss in this piece the six steps to calculating your crypto profits.
1. Invest into Crypto
You can only make a profit from crypto if you invest in one. Today, there are close to 6,000 cryptocurrencies to choose from. Do Your Own Research and invest in your preferred crypto based on the use case.
Investing in crypto can either be through spot trading, margin trading, or futures trading.
Regardless of which one you choose, you can either make a profit or a loss.
2. Ascertain The Value of The Crypto at The Time of Purchase
To calculate either your profit or loss, you need to be sure of the value of the crypto in fiat at the time of purchase. There are different tools and resources on the internet today that allow you to know the value of any crypto at any point in the past.
This is the first step to calculating your profit or loss. It’s not enough to know the value of the crypto but the value in fiat currencies. This can be in USD, JPY, RMB, or GBP. For more straightforward calculation, it can be in your everyday currency.
3. What’s the Current Value of the Crypto
Whether you are a day trader or a HODLer, you need to be sure of the prevailing value of the crypto to determine your profit.
Let’s say you bought AXS three months ago; you need to compare it against the value of AXS today at the point where you intend to take profit. Whenever you need to calculate your profit, you will rely on the current market value of the crypto.
4. Calculate The Difference in Percentages
Crypto profit and loss are best calculated in percentages, and you will want to know the percentage loss or loss over time. Let’s assume you own 10 Ethereum at the time when the value was $2000, and you now intend to take profit now that ETH is $3,700.
Start by subtracting the old value from the new value i.e $3,700 – $2,000 = $1,700.
Now, convert it to percentages $1,700/$2000 X 100= 85%. You have made 85% profit at the point you intend to take profit.
5. Using Your Start and End Balances
Aside from the four earlier steps, you can also adopt a start balance vs. end balance in ascertaining your crypto profits. This can be done over a long-term period, let’s say a year.
However, to do this, you need to have a grip of your deposits, withdrawals, margin profit or loss, and the trading fees.
As earlier said, this is best for calculating your crypto profits in the long term rather than immediate.
6. Through a Profit/Loss Calculator
The last step to calculating your crypto profit will be through a profit and loss calculator. You can rely on these tools in cross-checking your manual calculations.
Wrap Up
While the volatility of the crypto industry makes it challenging to calculate your profit, you still have to go through the hassle and know if you are getting anywhere with your crypto trades.
We hope we’ve been able to give you a heads up on pinpointing the growth you’ve experienced in the form of ROI.
