Like any other form of trading, if you’re someone who regularly trades Crypto, then the chances are you’re doing it in order to make a profit.
There’s a lot of money to be made trading crypto so it’s understandable why so many people are looking to invest their time and money into the market, however, if you’re new to trading crypto or unsure as to how you can keep track and calculate your profits, then we’ve made this guide which will give you all the information you need to be able to calculate your crypto profits.
Defining Profit (And Loss!)
Even the most inexperienced of traders will have a decent understanding of what profit and loss mean, however, we’ll run through it again just to ensure that you know.
Whenever it comes to selling your crypto asset, depending on the price you sell it for, you will either be making a loss or hopefully, making a profit.
To make a profit on your crypto asset (see also ‘How To Short Crypto‘), you need to sell your asset at a higher price than the price you originally paid for it.
If you sell it for a lower price than you originally paid for it, then you are making a loss.
Calculating Profit And Loss In Crypto
The first step to calculating both your profit and your loss is to know and to take note of your breakeven price.
This will give you a figure in which you are then able to contrast it to, which will then determine whether you have made a profit or a loss.
The best way to illustrate this is through the use of an example exchange.
Hypothetically, let’s say that you purchased some Bitcoin 2 months ago for the price of $5,000, the price you initially paid then becomes your breakeven price.
Then, if you check the market in the present day, and you see that Bitcoin is now selling for $6,000, you then deduce the breakeven price away from the current market price, which will then give you the figure of your potential profit.
In our example, if you take 5,000 away from 6,000, you are then left with 1,000.
Which in our hypothetical situation, would mean that there would be $1,000 in potential profit.
From this point, you can then decide whether you’d like to sell your crypto for this price to make a profit, or you can leave it in the hopes that the price will continue to rise.
Whilst this seems simple, this process can become a lot more complex if you’re holding multiple different cryptocurrencies if you’re trading on a regular basis, and if each of your cryptocurrency assets has been set various price point targets.
There are also some additional metrics that you should be aware of that go into calculating your profit, so aside from your total profit, you also need to consider:
- The average buy and sell price
- Your realized profit (Which is the profit you have made on previous sales)
- Your unrealized profit (The amount calculated using the current market price)
- Your total profit (The sum of both your realized and unrealized profit)
If you’re a new trader, it’s common to become impatient with the market and withdraw your profits, even if there is an ongoing upwards trend, whereas sometimes traders may forget to check the market or decide to hold their assets when they should sell.
Crypto markets are extremely volatile so you should keep a close eye on how the market is behaving so you can figure out when the best time to sell is (see also ‘How To Sell Crypto On Crypto.com‘).
Remember, that whilst you may have technically made a profit if you buy an asset and then the market price increases, this is what is known as an unrealized profit because you have yet to actually sell your asset and receive that money.
The same goes for losses, if your asset’s price dips below what you initially paid for it, then you haven’t actually lost your money unless you decide to make a sale.
Calculating The Profit Percentage
Rather than looking at it in dollars, a lot of crypto traders prefer to work out their profit percentage in order to conduct an analysis of their profits and losses.
It’s relatively easy to do and is done by multiplying your breakeven price by the increase in value of the asset.
If you want to achieve this, then follow this easy guide:
So, to calculate the profit percentage, you multiply the price you bought the asset at (the breakeven price) by the percentage expression that corresponds to it.
For example, if you purchase an asset at $3, and only wish to make 10% of the trade and then sell your asset, you then multiply the breakeven price by the percentage profit or 10%.
So, you would multiply $3 by 1.1, which would then give you the price of your asset once you sell.
You then subtract the price you sell the asset for, by the price you paid, which in this case, would be $3.3 subtracted by $3, giving you $0.3 profit.
The general rule for this type of calculation is that each time you want to multiply by a hundred, you add 1.
If you’re struggling to do these calculations by yourself, or simply think that it would be quicker to do it online, then you’re in luck, as there are plenty of online crypto profit calculators out there that will provide you with a quick and effective way to calculate the profit from your crypto assets.
The best thing is, that most of them are relatively cheap, if not free for a period of time! So it’s good to make use of these free trial periods.
To summarise, calculating your crypto profits is fairly easy, but if you’re struggling to do it yourself, use an online calculator!