Many people invest in cryptocurrency with the belief that they can make money from their investments. If you are contemplating joining the crypto industry, one of the things you should probably think about is how cryptocurrency profits are calculated.
This article is a friendly guide because it carefully explains the various methods in which you, as an investor, a trader or a beginner, can successfully calculate your cryptocurrency profits.
A Simple Method
A simple method of calculating cryptocurrency profits involves a basic knowledge of mathematics. In the business world, gross profit is calculated by subtracting the cost price from the selling price.
Gross Profit = Selling Price - Cost Price
This method can also be used in cryptocurrency. An example: An investor buys a unit of Crypto Z for $25,000. Later, the value increases and he sells it for $35,000. The gross profit earned from this trade is the difference between the cost price and the selling price. In this case, the cost price is $25,000 and the selling price is $35,000.
Gross Profit = 35,000 - 25,000 which is $10,000
It is very simple!
However, gross profit is not your actual profit. You can calculate your actual profit (also known as net profit) by subtracting the total fee incurred during the trade from the gross profit. This extra fee is also known as the transaction fee.
Net profit (Actual Profit) = Gross Profit - Trading / Transaction Fee
Let us calculate the net profit from the transaction in the example above, assuming that the transaction fee is 2% of the selling price.
Transaction fee = 2% of $35,000 which is $700
Net Profit = $10,000 - $700 which is $9,300.
Hence, the actual profit earned by the investor is $9300.
As mentioned earlier, this method of calculating cryptocurrency profits is very simple because it only requires the knowledge of simple mathematics. There are yet other available methods for determining cryptocurrency profits. These methods will be explained in the next paragraphs.
Using Cryptocurrency Calculators
Many investors make use of a cryptocurrency calculator in order to save time while calculating their profits from multiple transactions. There are different kinds of cryptocurrency calculators. Some of them can be used without charge. The results are accurate, can be obtained within minutes and involve processes that are stress-free.
A crypto profit calculator is a kind of cryptocurrency calculator specifically used to calculate crypto profits and losses. Usually, to make use of a crypto profit calculator, you'll be required to input the selling price, cost price, transaction fees and other necessary information.
Cryptocurrency miners can use a mining calculator to calculate mining profits. Mining calculators also allow miners to calculate the cost of electricity, total mining cost and profit ratios.
Different cryptocurrency calculators are available depending on the choice of the investor. For example, trusted Bitcoin investment sites provide cryptocurrency calculators that can help Bitcoin users calculate their profits and losses, including potential ones.
It is very important for all cryptocurrency users to possess knowledge on how to calculate crypto profits.
Gross profits can be determined manually by deducting the cost price of crypto from the selling price. Net profit, on the other hand, can be calculated by subtracting the transaction fee from the gross profit.
A cryptocurrency calculator is a tool that can also be used to calculate crypto profits from multiple transactions within minutes.