Why invest in digital assets?
First of all, it should be briefly said about the reasons why people consider investing in cryptocurrencies to be profitable at all. There are several causes for this and each of them is considered to be quite significant.
- Innovative technological solutions and security.
Bitcoin is the first decentralized cryptocurrency. It is considered anonymous, secure, and accessible to every consumer. This digital currency is based on Blockchain technology, which cannot be faked, as each transaction is built on the previous one and is recorded in a digital registry. Consequently, cryptocurrencies are secure from scams and financial fraud at the system level, which increases the level of trust of crypto wallet holders and confirms the security of the digital currency.
In addition to the technological innovations that underlie cryptocurrencies, one should take into account the large-scale crypto community. The number of new cryptocurrency users has increased by several million people in recent years, and this number continues to grow. This means that the demand for cryptocurrency will also grow, which acts as a kind of guarantee of its stability.
Major market players are taking digital assets more and more seriously. For example, bitcoin is recognized as a fast, large-scale, and stable digital asset capable of providing global payments. In some European and Asian countries, bitcoin is considered equal to fiat currencies and is recognized as a convenient payment option for all kinds of goods or services. The legislation is regularly amended to regulate the cryptocurrency business, as a result of which bitcoins have become legalized in many countries.
- Trading volumes
Bitcoin is developing and growing at an incredible rate, which leads to the growth of various exchanges for trading it. Trading platforms process billions of dollars worth of transactions every day, which exceeds some classical currencies. Bitcoin has overtaken the Japanese yen in terms of trading volumes and has become the biggest player, taking the lion's share of the global exchange market.
How to calculate crypto profit?
The first thing to do before how to calculate profit on cryptocurrency is to decide how you are going to make money on it.
Simply put, there are three main ways to make money from digital assets:
- Trading on exchange.
Each of these paths is quite extensive, and in principle, can be divided into several more branches, but it does not make sense within this, as these three sections are pretty enough to understand the topic.
As you can understand, each of these methods is different from the other, and, therefore, calculates the income received from each of them separately.
Mining is the production of cryptocurrency through the power of computer equipment. In the language of blockchain engineers, mining is the finding of new blocks in which information about the latest transactions is stored. As a result, they form a continuous and consistent chain: the blockchain.
To find a new block and include it in the existing chain, it is necessary to solve a certain mathematical problem. In fact, this is what miners do, or, more precisely, their special devices. If the equipment finds the correct answer the fastest, its owner receives a reward in the form of digital coins. In this case, the more miners are aimed at solving the problem, the more complicated the search for the right answer is.
So, what do you need to consider to understand how to figure out crypto profit?
- Block finding difficulty (cryptocurrency complexity). This parameter is one of the most important because it is the complexity that can directly affect the cost of the equipment and the amount you will pay for the use of electricity.
- Hash rate. Finding the hash is the very mathematical problem that the miner's device must solve, and hashing speed is the speed at which these calculations take place. Consequently, hashing speed is a key selling point for a piece of mining equipment and an important indicator of how successful it will be in the crypto-mining process.
- The reward for finding a new block. As the term implies, the block reward is the amount of cryptocurrency awarded to miners who solve the problem and find the block. It is an important element of any mining profitability calculation.
- Power Fee. Solving the crypto hash problem requires a lot of processing power, even for specialized mining equipment. This is exacerbated by the constant adjustments to the difficulty of each crypto algorithm. So - be sure to find out the electricity tariff and calculate the profitability taking it into account.
- Equipment costs. Another major factor when calculating the profitability of crypto mining. Most CPUs and GPUs can be purchased for a few hundred dollars, while ASICs usually cost thousands of dollars. ASICs are more economical in terms of power usage and physical size of the device, but certainly not cheap either.
In a nutshell, let's talk about ASIC miners. This is special equipment that is only sharpened for cryptocurrency mining. That is, nobody will prevent you from mining cryptocurrencies on your home computer, but if your purpose is bitcoins, the power of home equipment will be not enough to make a profit. In the case of bitcoin, the home computer will even turn out to be unprofitable, because it will only bring you expenses - for electricity, equipment, and its repair.
There are probably all the parameters you need if you want to know how do you calculate crypto profit. Of course, it is quite difficult to calculate all this manually, that's why there are all kinds of online calculators that allow you to do it. Your next steps are simple - enter the basic parameters that we listed above and get the numbers. With the help of such services, you can also find out how to calculate crypto profit percentage from the invested funds.
When choosing a cryptocurrency profit calculator, focus on the following important parameters:
- The amount of input data. The more information the program collects to perform the calculations, the more correct the results will be. For example, some of them require the input of power, cost of equipment used, and other parameters.
- Easy interface. One of the key factors is the usability of the mining calculator. It is important to have an interface in your language and ease of presentation of results.
- Accuracy. This is one of the main criteria, which cannot be evaluated at once. It takes time to determine whether an online service is accurate or not. On the other hand, this indicator can be estimated indirectly. The more parameters are used in the calculation, the more accurate the final figure is.
- Reviews. Experienced miners when purchasing equipment always makes calculations and determine the relevance of currency mining. Subsequently, they see how accurate the results were. They leave comments on various forums, thus helping newcomers to make the right choice.
The criteria for selecting a cryptocurrency calculator profit are conditional, because the algorithm in most of the programs is similar, and only the interface changes. Members often focus on usability and reviews (this is usually enough).
Investing and trading on the stock exchange
If you are not ready to invest in equipment, as well as to pay high electricity bills, you can try yourself in investing or stock trading. These two concepts, though different, share the same concept of buying as low as possible and selling as high as possible.
Speaking of the exchange, we can't forget to mention such useful things as crypto automation, which helps to automate your trades and thus increase your income and copy-trading, through which you can copy deals of successful traders and also stay in profit.
So, how to calculate cryptocurrency profit in this case? As an example, we use the most famous cryptocurrency in the world.
Suppose you purchased it for $10,000, and after a while, its price went up sharply, and you sold it for 35 000 dollars.
25000 dollars in this case is your profit. However, this profit could not be called a net one, because there are several other parameters, which must be kept in mind.
- Commission for exchange services. If you use an exchange to buy or sell, keep in mind that you must pay for its services. The amount will depend on the exchange, the type of digital assets, and other parameters, which may be different for each of the exchanges.
- Withdrawal fees. There is another type of commission, which you also have to pay if you want to use exchanger services. This is the amount you have to pay for the opportunity to withdraw money from the exchanger's wallet to your external account or transfer into fiat. As in the previous case, this amount will be different for each exchange.
There are other types of commissions because there are many cryptocurrencies and exchanges. But the two main ones listed are enough to understand the situation.
Profit is obtained by subtracting the number of commissions from the value we calculated above - $25,000.
As in the case of mining, you can also calculate your profit with a crypto profit/loss calculator. There are a great many of them, both paid and free. In addition, almost every more or less known exchange or crypto platform has its own calculator that you can use to make such calculations.
From a technical point of view, this is an online service that can consider many parameters. You should choose it based on roughly the same parameters as in the case of mining calculators. Of course, these types of cryptocurrency earnings differ from each other, but the calculator parameters that you should pay attention to remain similar.
To summarize, it can be said that earning from cryptocurrency, whether it is mining, investment, or trading on the exchange, can bring quite high incomes. However, before proceeding to one or another type of it, you should know how to calculate profit cryptocurrency. To do this, refer to mathematical calculations or online calculators. They will help you do it quickly and without errors.