How To Calculate Crypto Profits: An Overview
Investing in cryptocurrencies like Bitcoin (BTC) or Ethereum (ETH) can be lucrative. Still, investing in blockchain-based assets is not without risks. One of the biggest challenges for investors in the crypto market is understanding how to calculate their profits (or losses) when trading digital assets.
Not only does calculating cryptocurrency profits depend on the type of order you place (market or limit), but it also depends on the exchanges you’re using and whether or not you’re factoring in fees. It also matters for tax purposes, as countries have different rules about taxing cryptocurrency investment gains.
This article will provide a general overview of calculating your profits (or losses) in US dollars from trading cryptocurrencies.
How To Calculate Crypto Profits on Your Own
Subtract Your Buying Price From Your Selling Price
This is the most basic way to calculate your crypto profits. Take the selling price of the cryptocurrency and subtract your buying price from it. This will give you your net trading profit or loss for your crypto investment.
For example, let’s say you bought 1 BTC on Binance at $10,000 and sold it later at $11,000. In this case, your net Bitcoin trading profit would be $1,000. However, this method doesn’t consider the fees you pay to buy or sell your crypto.
In this case, you need to factor those fees into your trading strategy to get your actual profit. For example, let’s say you paid a 0.1% fee to buy your BTC and then a 0.2% fee to sell it. In this case, your net profit would be $1,000 – ($10,000 * 0.001) – ($11,000 * 0.002), or $968.
This final figure is your actual net profit from your trade.
Calculating Crypto Profit Percentage
Now that you know how to calculate your actual profit or loss, you might be interested in calculating what percentage return you made on your investment. First, divide your net profit figure by your original investment amount, and multiply by 100.
For example, in the scenario above where you made a $1,000 profit on 1 BTC, your percentage return would be (1000/10000)*100, or 10%. Again, however, if you want a more accurate idea of your overall return, you’ll need to factor in any fees you paid. In the example above, with costs factored in, your percentage return would be (968/10000)*100, or 9.68%.
This percentage return can be helpful for tax purposes, as it will help you calculate how much you owe in taxes on your capital gains.
However, it’s essential to remember that different countries have different rules about how cryptocurrency gains are taxed, so check with your local tax authority to ensure you comply with the law.
How To Track Unrealized Gains
In addition to calculating your realized gains and losses from trades, you may also want to track your unrealized gains and losses. Unrealized gains or losses are those that have not yet been realized, meaning you have not yet sold the asset in question.
Tracking these can give you a better idea of your overall profitability and help you make more informed decisions about when to buy and sell.
There are several ways to track your unrealized gains and losses. One popular method is to use a spreadsheet like Google Sheets or Microsoft Excel. You can also find several crypto portfolio tracking tools that will do the job for you.
Another tool is to partner with a cryptocurrency tax software like TokenTax or CryptoTrader.tax. These tools can automatically track your unrealized gains and losses and help you with various other tax-related issues. Lastly, several cryptocurrency tax firms can assist those who prefer to seek professional help.
No matter which method you choose, tracking your unrealized gains and losses can be a helpful way to stay on top of your overall profitability and make more informed decisions about when to buy and sell.
Creating a Crypto Trading Spreadsheet
Creating a spreadsheet is one of the best ways to track crypto gains and losses. This will allow you to track all your trades in one place and see your overall profitability.
Let’s run through a sample one quickly. To start, create a new spreadsheet and label it “Crypto Trading.”
Then, create columns for the following information:
- Date of trade
- Coin traded
- Amount traded
- Entry price per coin (in USD)
- Fees paid (in USD)
- The total cost of trade (in USD)
- How much money you paid per coin (in USD)
- Profit/loss per coin (in USD)
- Total profit
If you’re a spreadsheet aficionado, you can program formulas to calculate some of this information for you automatically. However, for those that aren’t, it still may be helpful to do some quick math to see how your trade affected your overall profitability.
Once you have all this information entered into your spreadsheet, it will be much easier to track your overall profitability and get a more holistic view of your trading career.
How To Use Crypto Profit Calculators for Beginners
Coinmash Calculator is an online crypto calculator that allows for profit and loss calculation from cryptocurrency trading.
To use the calculator, enter your trade information into the fields provided. This includes the date of the trade, the coins traded, the amount traded, the price per coin, and any fees paid. Once this information is entered, the calculator will automatically generate your profit/loss statement.
This can be a helpful tool if you want to quickly see your trade’s profitability without creating a spreadsheet or doing any complex calculations. However, it’s essential to remember that the calculator does not account for taxes, so you’ll need to factor those in yourself.
Cryptoprofitcalculator.com is another online tool that allows you to calculate your profits and losses from cryptocurrency trading. This calculator works similarly to the Coinmash calculator and provides instructions on the page.
The ProfitCalc App
The ProfitCalc App, available on iOS, Android, Windows, and PC, is an app that allows you to track your cryptocurrency portfolio and calculate your profits and losses. The app also includes a news feed, price ticker, and other information that can be helpful for traders. The app provides advanced analytics and trading tools but costs $29.95 per month, making it prohibitive for some users.
Why Do We Calculate Crypto Profits and Losses?
First, it can give you a better idea of your overall profitability. If you’re only tracking your realized gains on your crypto wallet holdings, you may not have an accurate picture of how well your investment is doing.
Second, it can help you make more informed decisions about when to buy and sell, as cryptocurrencies, NFTs, and other digital assets are known for their volatility.
If you know that you have a significant unrealized gain, you may be more likely to hold onto the asset for a more extended period since selling it would realize those gains and potentially subject them to taxes.
On the other hand, if you have a significant unrealized loss, you may be more likely to sell the asset to cut your losses.
Of course, there’s no right or wrong answer here, and it’s ultimately up to you to decide when to buy and sell. However, tracking your unrealized gains and losses can help you make more informed decisions about when to do so.
- Calculating your crypto profits and losses can give you a better idea of your overall profitability and help you make more informed decisions about when to buy and sell. Several online calculators and apps can help you with this process.
- Creating a spreadsheet or using an app to track your trade information is the best way to calculate your profits and losses. Be sure to include all relevant information, such as the trade date, the number of coins traded, the amount sold, the price per coin, any fees paid, and the current price per coin.
- Remember to factor in crypto taxes and trading fees when calculating your profits and losses.
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