Crypto Foundations · Crypto Trading Guide

Read the base asset and quote asset first. Then calculate returns in the currency that matters to your portfolio.

Read a pair correctly

In BTC/USD, BTC is the base asset and USD is the quote asset. A price of $50,000 means one BTC costs $50,000. Buying 0.02 BTC at that hypothetical price requires $1,000 before fees. Fractional ownership changes the cash amount, not the percentage price movement.

Distinguish a return from a price difference

If the position rises to a price of $55,000, its value becomes $1,100. Gross profit is $100 and gross return is 10%. The correct denominator is the invested amount. A decline from $50,000 to $45,000 is also 10%, but recovering from $45,000 to $50,000 requires about 11.11%. Equal absolute moves do not always have equal percentage returns.

Translate the quote currency

Suppose TOKEN/ETH rises 10% while ETH/USD falls 20%. The dollar value factor is 1.10 × 0.80 = 0.88, a 12% loss. Adding the percentage changes would incorrectly give a 10% loss. Record returns in a consistent reporting currency, particularly when trading several crypto pairs.

Keep execution separate from valuation

An inverse quote is the reciprocal of the original price, but executable bid and ask prices must also reverse sides. Valuing holdings at a midpoint can be useful for reporting. It does not establish the proceeds of selling the whole position. For a trade record, use actual fills and identify whether fees were paid in the base asset, quote asset or another token. Preserve quantities as well as cash amounts so the calculation can be reproduced.

Try it yourself

You buy 40 tokens at $12 and sell them at $13.50. Entry and exit fees total $6. What is the net profit and return on the $480 trade value?

Show the worked answer

Gross profit is $60. Net profit is $54, or 11.25% of $480. A return calculated on total cash including entry fees would use a slightly different denominator.

Further reading

Educational material. Examples and rates are hypothetical, not trade recommendations. Product terms, eligibility and risks vary by venue and jurisdiction.

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