Mastering Crypto Portfolio: 8 Effective Methods to Calculate Profit and Loss Online

We know that the Crypto market is ever-evolving, thus making it tedious for you to manage and analyse your portfolio performance.

Here is where an online crypto profit calculator comes to our rescue to serve as an essential investment tool to provide efficient resolutions for profit and loss tracking.

Why Do We Calculate Crypto Profit and Loss?

As an Investor, When you Calculate crypto profit and loss using Crypto calculators online, you will get a beneficial judgement on your portfolio performance that would help facilitate informed decision-making, manage risk factors, ensure tax regulation compliances, enable performance benchmarking, which would indeed assist you in setting and achieving financial targets in cryptocurrency investments.

Let us examine the four online methods facilitated by crypto profit calculators to calculate profit and loss in your portfolio precisely.

1. Simple Calculation Method: Buy/Sell

• This is the simplest method to calculate your crypto profit and loss. It involves subtracting the total cost of purchased assets from the current value of holdings.
• There are typical fields available in online crypto profit calculators wherein you can input the number of coins purchased, price of purchase, sold quantity and sale price. Once you enter all required fields with the values, the calculator generates your profit and loss automatically.

2. FIFO (First In, First Out) Method:

• FIFO is a general accounting method to calculate profits and Losses for tax-related purposes. It is useful for investors who want to maintain records for tax purposes. It works on the ‘First In First out’ principle meaning whichever asset is purchased first should be sold first, therefore, you will have to keep track of the order in which you purchase and sell your crypto assets.
• The crypto profit calculator online with the FIFO process requires you to input details such as prices, quantity and dates. The profit/Loss is calculated by considering the cost of the oldest assets first and then coming to the new ones.

3. Average Cost Method

• The Average cost Method provides a summary of your overall investment performance by calculating the average cost of your purchases of a specific cryptocurrency.
• It uses this average cost to find out your profit or loss when you sell some part of your holdings.
• Whenever you sell all or some of your crypto assets, the online crypto profit calculator enumerates the average cost per coin to calculate gain or loss. Thus, it is a straightforward method.

4. HIFO (Highest In, First Out) Method:

• HIFO can also be called the Specific Identification method. HIFO tracks the cost of each cryptocurrency unit individually. Unlike FIFO, HIFO allows you to choose the assets that you want to sell based on their acquisition costs.
• Online crypto profit calculators with HIFO processes allow you to enter particular details related to your transactions like price and date of purchase before applying HIFO

5. LIFO (Last In, First Out) Method:

• Another accounting technique is called LIFO. In LIFO or Last In First Out, the most recent assets are sold first. This method is mainly useful during periods of rising prices as it can result in lower reported profits and thus lower taxes.
• Online calculators that support LIFO calculations allow you to input your transaction details, and the calculator will use the LIFO principle to determine your profit or loss. This method can be advantageous for tax management, but it requires meticulous record-keeping.

6. Weighted Average Cost Method:

• Similar to the average cost approach, the weighted average cost method divides the total cost of all acquisitions by the total number of assets. This provides a weighted average cost per unit.
• Online calculators for the weighted average cost method require you to enter all your purchase transactions, including quantities and costs. The calculator determines the weighted average cost that is used to evaluate the profit or loss on any sales. This method provides a fair assessment of your investment performance over time.

7. Specific Identification Method:

• The specific identification method involves choosing specific units of cryptocurrency for sale based on their purchase history. This method enables you to specifically choose which assets to sell. This can be useful for tax planning and for optimizing gains or losses.
• Online calculators that support this method allow you to manually select which purchases to match with sales. This approach allows for extensive customization, but it requires careful tracking of each transaction.

8. Dollar-Cost Averaging (DCA) Method:

• Regardless of a cryptocurrency's price, you may invest a certain amount of money in it regularly using the dollar-cost averaging (DCA) investing approach. You should take into consideration, the average cost of all purchases made over time to determine profit or loss when utilizing the DCA approach
• It is necessary to enter each investment transaction into online DCA calculators. The calculator then calculates the average cost and helps you determine your overall profit or loss based on current market prices. DCA is a popular strategy for reducing the impact of market volatility.

Conclusion

• As an investor, you are entitled to informed decision-making and portfolio optimisation which can be achieved by calculating the profit and loss in your crypto portfolio.
• Online crypto profit calculators provide you with efficient solutions for your investment needs ranging from simple calculation to Advanced analytics.
• You will be able to confidently navigate the crypto market, maximise returns, and achieve your financial objectives by using the methods described above, combined with the features of reliable online platforms like Botsfolio.

Happy trading 💰