Nouvive teaches you how to track your trades and make a good return on investment through changing your mindset.
It is important to understand as a new investor or trader that you must measure your investment to a benchmark. A bench mark is a standard against which you measure the value of your investment in that specific asset class. For those who invest in stocks, the S&P 500 is their benchmark. A benchmark helps you to determine if your investment is profitable or not. It shows you whether or not you are investing efficiently with the best Return on Investment possible.
What should you measure your Cryptocurrency Investments in?
The value of the US Dollar or the current value of Bitcoin? What is the most accurate benchmark to measure the profit or loss of your trading?
Fiat Currency Benchmark
This approach will value your profit or losses against traditional FIAT currencies such as the US Dollar, GB Pound, JPY, South Korea Won or your local currency. Most traders consider this option as the simplest way to calculate gains because you’ll know the value of each coin you intend to buy in your local currency.
If Bitcoin is currently selling at $10,000 and your intention is to buy Bitcoin worth $1,000, then you’ll automatically know that your money will get you 0.10 BTC. If Bitcoin price shoots up by 50% to $15,000, your BTC will also have increased to 0.15 BTC valued at $1,500. If you sold all your Bitcoin and cashed out, you would make a profit of $500, at least theoretically speaking.
What is Satoshi? It is the smallest denomination of Bitcoin 0.0001 is 1 Sats or Satoshi.
You can use the SAT value in the 1,800 Cryptoasset coins and tokens, especially as all of them cannot be purchased in fiat currencies. They can only be purchased in Bitcoin by converting your Fiat into Bitcoin and then your desired altcoins.
The most accurate way of calculating the value of your cryptocurrency investments, therefore, is by measuring your gains or losses against the current value of BTC. This approach takes into consideration the opportunity cost of keeping your BTC a bit longer rather than using the BTC to buy other altcoins. Opportunity cost, in this case, refers to the gains you’d have made by holding on to your BTC but gave up when you used the BTC to buy another digital asset.
Let’s consider, for example, if you bought a digital asset worth $0.50 per piece and after a short while the altcoin doubled its value to $0.10, you’d definitely be excited by the fact that your investment has doubled giving you a 100% return. However, if you initially used BTC to buy the altcoin and BTC tripled in value at the same time, then you will have lost in Satoshi or Bitcoin value. You would have fared better if you’d held on to the BTC instead of buying the altcoin. Remember the goal of investing in altcoins using BTC is to get a better return than the current value of Bitcoin. This is why you should measure your gains or losses against Bitcoin.
The best benchmark to measure your cryptocurrency investment, especially for altcoins acquired using Bitcoin, is definitely BTC. This approach even tells you whether you’d have made a better profit by holding on to the BTC or by using the Bitcoin to purchase a different altcoin. Using BTC as a benchmark saves you from investing in other cryptocurrencies which would not provide better returns than investing the same amount in Bitcoin. Your goal in investing in altcoins using BTC is to get better profit than Bitcoins can provide. That’s why it makes sense use BTC rather than fiat currencies to measure the value of your investment in altcoins initially purchased using Bitcoin.
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Information on these pages contain speculative statements that involves risks and uncertainties. Crypto-Assets profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell. Nouvive does not in any way guarantee that this information is free from mistakes, errors or material misstatements. It does also not guarantee that this information is of a timely nature. Crypto-Assets involve risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing or trading are your responsibility alone. For more information, please view the Risk Warning Below.