When you sell your cryptocurrency at a higher rate than you’ve bought it, it’s not always clear how much money you’ve gained. There are a lot of numbers to keep in mind, and some investors ignore them. However, being aware of the exact amount you’ve earned will help you make your financial planning more precise and improve your profit-making strategies. Let’s see how you can do this.
Calculating Crypto Profits: First Steps and Fees
Calculating rates
Let’s say you bought Bitcoin at $40,000 and sold it for $60,000. Your Gross profit will be $20,000, but do things look that simple in real life?
Often you wouldn’t want to sell the whole stash of crypto that you’ve bought before. In this case, you’ll have to keep in mind what fraction of a coin you are selling and compare its current price to the one it was when you purchased the crypto. To keep all these numbers at hand, you might want to run an Excel spreadsheet. Some exchanges provide tools for such calculations, but if you keep your money on non-custodial wallets, you’ll definitely need a handy third-party tool to count your profits.
Taking fees into account
When you sell your crypto, a part of your profits will be spent on fees, and this is another thing to consider. In some cases, they are negligible or low:
- In centralized exchanges like Binance, a trading fee is just 0.1% and lower. However, CEXes are not the best place to store your money, especially in the long-term: there, you don’t own private keys from your crypto, and the exchange can limit access to your coins at any time due to maintenance, a hacker attack, etc.
- In case you trade from a non-custodial wallet, you’ll have to pay a transaction fee to the blockchain of the coin you are selling. Some cryptocurrencies charge very low transaction fees: in Bitcoin Cash, Cardano, or Solana they are always below $1 and sometimes even less than a cent.
- The less often you sell your crypto, the lower fees you pay. This is especially the case for coins with high network fees. For BTC, they can reach $10-$30 or even more. Generally, you wouldn’t want to pay so much for small-sized transactions.
Fees are higher in non-custodial wallets when you trade on decentralized exchanges or exchange services like ChangeNOW. DEXes are very handy but they only allow trading assets based on Ethereum, which doesn’t work for everyone. In the case of ChangeNOW, fees are usually between 0.5% and 3%, and we allow users to trade assets from different blockchains. ChangeNOW partners with the best liquidity providers so we can pick the best rate at the moment of the exchange.
Why higher fees?
It’s important to keep in mind what you get for fees higher than on centralized exchanges. There’s an opportunity to trade right from your wallet, meaning that you never pass control over your crypto to anyone else. At ChangeNOW, we always calculate all fees in advance and include them in the estimated rate so that you can receive the amount as close to the estimated one as possible. We charge no hidden fees, so you can rely on this sum.
Interim summary
Getting back to the topic of this article, it’s crucial to keep in mind what fees you pay while selling your crypto. You can calculate that in your Excel spreadsheet by measuring the difference between the average market price of a given coin (shown on CoinMarketCap) and the price that we offer at ChangeNOW (the estimated exchange rate). In general, our fees are between 0.5% and 3%. However, they can go higher during periods of congestion on Bitcoin or Ethereum networks and if there’re high network fees (included in our estimated rate) of tens of dollars.
Crypto Profit Calculators
For traders
If you don’t only sell your cryptocurrency when it grows once in a month or so but also trade on daily and weekly price fluctuations, it might be a good idea to use a calculator like Sabe or this one.
When selling for fiat
If you want to sell your coins for fiat money, it will be convenient to calculate rates using the CoinMarketCap calculator or Currexy. Fees for fiat operations are generally higher than for crypto-to-crypto swaps. For instance, one of our fiat providers Simplex charges a 5% fee. However, we display all the figures in advance so you can decide whether you want to make a trade. Keep in mind that if you are selling crypto for a local currency, there is probably going to be an exchange of USD for that currency, and the rate might be slightly different than the one set by your national central bank.
For miners
Mining is a great way to make profits, however, as with anything else in crypto, it involves some risk-taking. To start mining, you’d need to put in a considerable investment before it starts bringing you money. We wrote about this in our article on the basics of mining and Bitcoin pools review. You may need to invest from a few hundred dollars to a few thousand dollars, depending on the coin you choose to mine. You also need to consider additional cost factors like buying additional equipment, maintenance, repair, electricity costs and so on.
Such handy calculators as BTC.com mining calculator, or CryptoCompare Calculator will help you take into account many factors while calculating your mining profitability. You can set your local electricity price, hardware expenses, the price of the coin that you mine, and many other factors.
Calculating Taxes on Crypto Profits
Profits from mining, trading and investing are all forms of income for which in most countries you have to pay taxes. First, you need to understand what exact action you are taking in terms of taxation and what will be a taxable event in your jurisdiction. For instance, holding appreciating Bitcoin in your wallet and swapping it to USDT is not taxable in the United States. Meanwhile, profits are taxed whenever they are gained via BTC-to-fiat transactions.
In each case, a special tax scale may be applied, so you can understand how much tax you have to pay step-by-step.
Here’s our article on crypto taxation that will help you understand the subject better. However, the best idea here would be consulting with a specialist — laws are unique for every country and change fast, so there are many nuances that we may have not shed light on. To calculate your tax expenses, use the Cryptotax calculator.
We hope this article has helped you understand how to calculate your crypto profits taking into account fees, taxes, and using special calculators or even an Excel spreadsheet. There might arise some difficulties with the latter, however, if you like customization, you can make it as close as possible to your needs. Good luck with your crypto earnings!