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Making accurate decision on profit and loss on crypto currency (make $10,000 with accurate calculation)

What is profit and loss (PandL) and how to calculate it

Profit and Loss refers to the financial gain or loss from buying and selling cryptocurrencies. To calculate it, use various method like the FIFO, LIFO, YTD, and more!

Anyone who has dealt with trading in traditional finance is likely to be aware of profit and loss (PandL). But is PandL in the cryptocurrency world the same? The ability to comprehend terms like mark-to-market (MTM), realized PandL and unrealized PandL will help develop a better understanding of the cryptocurrency a person holds.

Without a well-defined process to get insight into profit or loss, cryptocurrency trading may be overwhelming, and traders may struggle with what they are doing. PandL reflects the change in the value of a trader’s positions over a specific period.

To gain a clearer understanding, let’s examine it in the context of cryptocurrency trading.

Understanding the basics of PandL

PandL in crypto refers to the calculation of the profit or loss made on a cryptocurrency investment or trading position. It is a metric used to evaluate the financial performance of a trader or investor in the crypto market.

To begin, here are some key terms in PandL terminology:

MTM

MTM refers to the process of valuing an asset or financial instrument based on its current market price or fair value. For example, in the context of crypto trading, if an investor holds a certain amount of Bitcoin

BTC

tickers down

$26,396

, the value of that Bitcoin will fluctuate based on the current market price.

The general formula for calculating PandL is:

Suppose the MTM price for Ether

ETH

tickers down

$1,801

today is $1,970, while the MTM price yesterday was $1,950. In this case, the PandL is $20. It indicates a profit of $20. On the contrary, if the MTM price of ETH was $1,980 yesterday, it indicates a loss of $10.

Future value

Future value indicates the value of a digital coin at a future point in time.

For example, if a trader stakes Tron

TRX

tickers down

$0.0774

worth $1,000 with a 4% yearly reward, how much will the person get back after a year? The answer is $1,040. At the time of staking, the present value will be $1,000, while the future value will be $1,040.

There will be a present value at the point when the trader stakes, but if the person considers the future as a whole, there could be countless future values.

There is a different way to use future value as well. Traders could ask how much to stake to get $1,040 in a year. If they know the present and future values, they could calculate the discount factor. examples:

Realized PandL

Realized PandL is calculated after traders have closed their position (sold the cryptocurrency they hold). Only the executed price of the orders is taken into account in realized PandL, and it has no direct relation to the mark price.

The mark price is the price at which a derivatives contract is valued based on the current market price of the underlying asset rather than the price at which the contract is being traded.

The formula for realized PandL is

An example will help understand how to calculate realized PandL. If the entry price for buying X number of Polkadot

DOT

tickers down

$5.28

is $70 and the exit price is $105, the PandL for the period is $35, which refers to a profit of $35. However, if the closing price of the trade was $55, the PandL will be $15, but it will reflect a loss.

Unrealized PandL

Unrealized PandL refers to the profit or loss that is currently held in open positions but has not yet been realized through closing the position. The formula for determining unrealized PandL is:

Donald has purchased ETH contracts with an average entry price of $1,900. The mark price of ETH is currently $1,600. The unrealized PandL for Donald is the difference between the average entry price and the mark price.

Unrealized PandL = $1,900 – $1,600 = $300

How to do PandL calculation

To determine PandL in cryptocurrency, a trader needs to find the difference between the initial cost of acquiring a digital coin and the current market value of the same coin. Various methods to calculate PandL in cryptocurrency are as follows:

First In First Out

The FIFO method requires the seller to use the price of the asset from when it was first bought. Here is the process to calculate PandL using the FIFO method:

1) To settle on the initial cost of the cryptocurrency, multiply the purchase price per unit by the number of units sold.

2) To determine the current market value of the asset disposed of, multiply the current market price per unit by the number of units sold.

3) To find the PnL, deduct the initial cost from the current market value.

Suppose Bob first bought 1 ETH at $1,100 and a few days later bought 1 ETH at $800. A year later, he sold 1 ETH at $1,200. As he had first bought ETH at $1,100, this price will be considered the initial cost. Applying the FIFO method, Bob could calculate PnL as follows:

Bob’s initial cost = (1 ETH x $1,100) = $1,100

Current market value = (1 ETH x $1,200) = $1,200

PandL = $1,200 – $1,100 = $100 (profit)

Last-in, first-out (LIFO) method

The LIFO method requires the seller to use the most recent purchase price of an asset in the calculation. The other aspects are just like the FIFO method. Here is the PandL using the LIFO method using the same example as above:

Bob’s initial cost = (1 ETH x $800) = $800

Current market value = (1 ETH x $1,200) = $1,200

PandL = $1,200 – $800 = $400 (profit)

Weighted average cost method

The weighted average cost method requires traders to determine the average cost of all units of a digital currency in their portfolio to arrive at the initial cost. Here are the steps to calculate PandL using this method:

1) Determine the total cost of all units of the cryptocurrency. Multiply the purchase price per unit for each transaction by the number of units of the asset and add the numbers.

2) To arrive at the weighted average cost per unit of the digital coin, divide the total cost of all units by the number of units.

3) Find the current market value of the cryptocurrency sold. Multiply the current market price per unit by the number of units sold.

4) To determine PandL, subtract the average cost per unit from the current market value.

Suppose Alice bought 1 BTC at $1,500 and a few days later bought 1 BTC at $2,000. She later sold 1 BTC at $2,400. Here is the PandL using the weighted average cost method:

Total cost = (1 BTC x $1,500) + (1 BTC x $2,000) = $3,500

Weighted average cost = $3,500 / 2 BTC = $1,750

Current market value = (1 BTC x $2,400) = $2,400

PandL = $2,400 – $1,750 = $650 (profit)

Profits/losses from opening and closing positions

Analyzing open and closed positions at regular intervals is an efficient way to monitor performance. An initial purchase a person makes in the market is an open position, while selling the cryptocurrency is termed closing the position. If a trader buys 10 DOT, it is an open position. When the trader sells those DOT, the position gets closed.

For example, if a trader bought 10 DOT for $70 and sold them for $100, the person’s PandL would be $30 ($100 – $70). Regular analysis of trades in line with open and closed positions helps a person trade in an organized manner.

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How to Earn Money With Binance P2P | $10,000 Monthly

Main takeaways

  • Binance P2P is a peer-to-peer marketplace where you can directly trade crypto with other Binance users.

  • Binance P2P facilitates crypto transactions in your preferred payment method, local currency and price.

  • In this article, learn why users prefer Binance P2P, how the P2P merchant economy functions and discover basic P2P trading techniques to kickstart your crypto business.

Whether you’re an established trader or a first-time crypto user, anyone can open a trading business on Binance P2P. 

Peer-to-peer trading, also known as P2P trading, involves direct cryptocurrency transactions between users without a third party or intermediary. Unlike traditional exchanges, buying and selling crypto on a P2P marketplace does not include charts and market indicators. With P2P trading, you get more authority over who and how you trade. 

Keep in mind, the freedom of P2P trading does carry certain risks. While traditional exchanges help broker your crypto orders, P2P trading typically does not involve a third party to ensure your transaction goes smoothly. If you’re looking for a P2P marketplace, Binance P2P is a trusted trading platform designed for risk-conscious and everyday crypto traders.

Why Trade Crypto With Binance P2P?

Trusted by millions of users, Binance P2P facilitates crypto transactions in your preferred payment method, local currency and price. Below are three reasons why users prefer Binance P2P for their daily crypto trading. 

1. Industry-leading security

To ensure a safe trading environemnt for users, every trade on Binance P2P goes through our escrow service. Once you match and start dealing with a suitable buyer, your cryptocurrency is temporarily deposited until you confirm the funds have reached your bank account. If an issue arises during the transaction, you can file an appeal, and our customer service will help resolve the problem. 

2. Buy and sell with zero fees

Unlike traditional crypto exchanges, which collect a small fee from every transaction, the Binance P2P marketplace allows takers to trade with zero fees.

3. Customize your trading

With more than 300 payment methods, including SEPA and bank transfer, and more than 150 local currencies, Binance P2P provides a more customizable trading experience over traditional methods like spot trading. 

How to Start Your P2P Trading Business

Before we dive into the different P2P trading strategies, here’s an analogy to help you understand how our marketplace operates like a “merchant economy.” Either you’re tired of your daily job or looking for a side-hustle to generate extra income. Similar to services like Amazon Merchant, Binance P2P also allows you to start a business without a large amount of capital. 

1. Select an asset(s) to leverage

Amazon Merchant: You find a specific product high in demand but low in supply. You take advantage of Amazon to reach users worldwide. 

P2P Merchant: Find the right combination of cryptocurrency, fiat and payment method that’s hot in demand. With a bit of effort, you can carve your niche on Binance P2P.

2. Strategize your pricing

Amazon Merchant: Once you’ve found your product or niche, you must ensure your profit margins exceed your costs. For example, price of materials, shipping etc.

P2P Merchant: When posting your P2P advertisement, you can choose between fixed or floating price. If USDT costs 0.99 USD and you want to earn 5%, you would set a fixed price of  1.04 USD. On the other hand, floating price ads fluctuate with the market. If you want to buy USDT at the market price, you can set a floating price margin of 100% (pricing formula 0.99 x 100% = $0.99). If you want to get a lower price, you can set up a floating price margin of  99.98%. (pricing formula 0.99 * 99.98% = $0.98)

3. Promote your services

If you want to earn money with P2P trading, your offer must be competitive. Make sure you set a fair price and a wide range of payment methods. Some users are willing to pay more if you support harder-to-reach payment methods. You can also share your ad on the Internet to reach more users outside Binance P2P. 

3 P2P Trading Strategies to Earn Money

1. Publish buy and sell ads

Binance P2P’s ad posting feature is designed to meet the different goals and needs of the crypto community. You can set a thin price spread to reach more customers or set a wide price spread to generate more revenue with our ads. For example, setting a competitive price point will give you a strong reputation in the community.

2. Take advantage of crypto arbitrage

Arbitrage is the practice of trading assets on different markets and profiting off the slight price differences. The first step, find cryptocurrencies available on both Binance Spot and the P2P market. Next, go through each currency till you find a profitable price difference. Once you’ve found a suitable price difference, the final step is straightforward—buy low and sell high.

Example: BTC’s price on the Spot market on Binance is ~43,117 USDT. On the P2P market, there is an offer to sell BTC at ~43,841 USD. You can buy BTC at ~43,117 USDT on the Spot market, then sell it at ~43,841 on the P2P market. 

3. Arbitrage with fiat 

P2P markets like Binance P2P aren’t just limited to crypto. Our P2P fiat market supports more than 70 local currencies. With a bit of time and money, all you need to do is search the market for fiat price differences you can quickly leverage. Follow our case study below to see this in action:

Transacting (BTC/USD)

  • Buy price: BTC/USD = 44,421 USD (39,534 EUR)

  • Sell price: BTC/USD = 43,843 USD (39,020 EUR)

  • Profit: $-578 (Sell price – Buy price)

Transacting (BTC/EUR)

  • Buy price: BTC/EUR = 37,990 EUR (42,928 USD)

  • Sell price: BTC/EUR = 38,500EUR (43,505 USD)

  • Profit: 38,500 – 37,990 = 510 EUR

Case Study:

  • Say you buy BTC with EUR and sell it in the EUR market, you earn $510. However, if you buy BTC with USD and sell it in the USD market, you lose $578. For this example, you could leverage the price difference if you own a multi-currency bank account or two bank accounts, one for USD and one for EUR. If you buy BTC in the EUR market at 37,990 EUR and then sell it in the USD market for 43,843 USD (39,020 EUR), you earn 1,039 EUR (39,029 EUR – 37,990 EUR)

How to Buy Bitcoin with Your Bank Account on P2P | Make $5,800 Daily

If you’re looking for a quick and convenient way to buy Bitcoin and other cryptocurrencies, try linking your bank account. Though Binance P2P supports more than 700 payment methods, including debit card, credit card and in-person cash payments, bank transfer remains one of the most popular payment methods on the platform.

More people choose Binance P2P than any other crypto peer-to-peer platform, thanks to its low fees, wide selection of cryptocurrencies, and flexible payment methods. In addition, Binance P2P supports more than 100 local currencies, so chances are, your local bank and preferred currency are supported. There are three different ways you can buy crypto on Binance P2P using your bank account: conventional Bank Transfer or SWIFT and SEPA for international money transfers. Read on to understand how these three payment methods differ and learn which one you should choose. 

How Do I Buy Crypto with Bank Transfer?

Bank transfers are one of the most popular payment methods on Binance P2P, allowing users to quickly send money to one another. With conventional bank transfers, users link their bank account to Binance P2P in order to send and receive money. This allows users to buy and sell cryptocurrencies like Bitcoin, Ethereum, BNB, Dogecoin and more. 

Because peer to peer crypto platforms connect buyers and sellers, and vice-versa, by using bank transfer, funds in your bank account will be transferred directly to the counterparty’s bank account. Follow these simple steps to buy crypto instantly using bank transfer.

Step 1: Tap [Buy] on the top left, select the fiat currency you want to pay with and then select [BTC], or the cryptocurrency you’d like to buy.

Step 2: Select the [Payment method] button in the middle. Filter the ads by selecting “Bank Transfer” in the drop-down menu. Afterwards, choose the P2P ad that suits your needs.

Step 3: Enter the amount you want to purchase, tap [Buy BTC] and then press [To Payment Page]

Step 4: Select [Bank Transfer], copy and paste the required details from your mobile banking app and then transfer the funds. These details may include a bank account number, bank name, branch information, or more. Once the seller receives your funds, they’ll then release the crypto assets. 

 

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Buy USDT Via P2P Bank Transfer (Buy Low, Sell High)

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