Cryptocurrency, when invested correctly, can offer amazing returns. Experienced investors and traders often do fundamental and technical analyses to find the right assets to invest in. However, they also use other tools, like risk management and calculating the value of their assets.
It’s not just about finding the benefits of DASH coin or any other crypto; it’s about being smart with what you invest in and what tools you use. This article focuses on one of the most valuable tools: calculating the value of your crypto holdings.
Understanding The Basics Of Cryptocurrency Value
Before we even dive into calculating the worth of digital assets, let’s learn what makes crypto valuable. Digital currency isn’t backed by a government or gold reserves, so there are other things that influence its price. Here are the factors that influence crypto’s value:
- Adoption. One key element that influences the value of a cryptocurrency is its adoption rate. If cryptocurrency is extensively adopted and used by individuals and businesses, cryptocurrency asset pricing may rise as more people desire to acquire it.
- Demand and supply. A cryptocurrency’s value can be affected by its supply and demand. The value of a cryptocurrency will rise if supply is restricted and demand is high. In the opposite case, if supply exceeds demand, the value of the cryptocurrency will fall.
- Regulation. The value of a cryptocurrency often rises if it’s subject to favorable legislation. However, if it’s the other way around, crypto’s value often falls.
- Coverage in social and other media. The value of a cryptocurrency can also be influenced by media publicity, even though it’s not always a good thing, and investors should look at other things if they plan to invest. Overall, positive media publicity can boost demand, while negative media coverage can reduce it, leading to value loss.
- The sentiment factor. Market sentiment can influence cryptocurrency value. If investors are bullish on a certain cryptocurrency, its value will rise. However, if the market sentiment is negative, the asset’s value will fall.
- Utility. Cryptocurrencies with a real-world application, such as enabling transactions or serving as a store of wealth, are more valuable than those without.
As you see, it’s crucial to consider all these factors before investing in cryptocurrency. There are also ways of determining cryptocurrency portfolio value that should help investors ensure they aren’t losing money.
Identifying And Tracking Cryptocurrency Holdings
Typically, most experts recommend investors invest in several assets to diversify their portfolios. However, it means that it’s difficult for them to calculate the value of their holdings since they have several types of assets. Luckily, estimating cryptocurrency portfolio value is easier with tools and platforms that help with real-time cryptocurrency portfolio valuation. These tools are as follows:
- Delta. It’s a cryptocurrency portfolio management tool with over 6,000 coins. It lets you make several portfolios, track your profits and losses, and set price alerts. Delta also offers a number of analytical tools and reports to assist you in better understanding your assets. Overall, Delta is a great digital asset value calculation tool.
- CryptoCompare. It’s a cryptocurrency market data platform that offers real-time pricing and market statistics. It also features news and analysis and a variety of portfolio tracking tools. Users can build various portfolios, track profits and losses, and set up price alerts. CryptoCompare also includes complex features like historical data analysis and coin-comparing tools. Thus, CryptoCompare is a powerful assistant to those interested in investing in crypto.
- Blockfolio. It’s another popular cryptocurrency portfolio tracking tool with many features and benefits. Blockfolio allows users to keep track of over 10,000 coins and tokens across 500 exchanges. They can manually enter their assets or connect their exchange accounts to automatically sync portfolios. Moreover, the app offers real-time price and market data, news and notifications, and a variety of additional features. It’s one of the best crypto portfolio tracking tools.
Before choosing a tool from this list or doing your research and selecting other platforms, ensure you learn more about the chosen app.
Calculating The Value Of Cryptocurrency Holdings
Since now you know that there are crypto calculator tools to determine the value of crypto assets, let’s learn how to use these tools. Most portfolio tools operate similarly, so here’s a simple instruction:
- Add your crypto assets. First, enter the cryptocurrencies you own. Enter the amount of each cryptocurrency you own and the price you paid for it. You can also include any further transactions, such as buying or selling, to get a more accurate display of your holdings and if the tool allows you to do so.
- Check out your portfolio. The majority of portfolio tracking software will show your holdings in USD, but you can change it in settings.
- Keep an eye on any changes. Monitor changes in the cryptocurrencies you own to see how your portfolio is performing in terms of profit. You can set price change alerts.
Adjust if necessary. Update your portfolio tracking tool if you have made new transactions.
Overall, there are other cryptocurrency valuation methods, but the usage of portfolio tracking tools is the easiest solution.
Tax Implications Of Cryptocurrency Holdings
One of the most critical things to keep an eye on when having cryptocurrency holdings is taxes. Typically, regulations regarding digital assets change all the time, so investors should vary whether they must file for tax returns.
Cryptocurrencies are taxed like property for tax purposes in most countries. Any profits or losses resulting from the sale or exchange of cryptocurrencies must be recorded on your tax return.
Long-term capital gains tax rates, which are normally lower than short-term rates, may apply if you hold cryptocurrencies for more than a year before selling or exchanging them. However, if you sell or swap your assets within a year of purchasing them, you may be liable to higher short-term capital gains tax rates. Thus, learn about the rules in your country to avoid legal issues.
Strategies For Managing Cryptocurrency Holdings
Considering the notorious volatility of crypto assets, managing them is a challenging task. However, there are a few very convenient strategies that you can research and use. To name a few:
- HODLing. It stands for “holding,” but most investors use a mispronounced name HODL. It’s a common technique among cryptocurrency investors, and it entails purchasing and holding cryptocurrencies, especially during moments of market turbulence, with the idea that their value would increase over time.
- Stop-loss orders. This technique entails setting a specified price at which you will automatically sell your assets if the price falls below a specific threshold is what this entails.
- Diversification. This method can help protect your portfolio from significant losses in the event that one particular cryptocurrency experiences a sharp decline in value. Invest in several assets to avoid big losses.
- Rebalancing. Another strategy is to periodically rebalance your portfolio based on calculated value. The method involves selling some of your holdings in crypto that has appreciated significantly and reinvesting in cryptocurrencies that may be undervalued.
Regardless of the strategy you choose, you should feel comfortable with it. Thus, do your research and ensure you choose a method that aligns with your goals and risk tolerance.
Any investor must calculate the worth of their cryptocurrency holdings. It enables you to monitor the performance of your portfolio, make good investment decisions, and stay on top of tax requirements.
You may better manage your digital holdings and boost your chances of success in the extremely volatile cryptocurrency market by employing portfolio tracking tools and smart management practices. It’s also vital to use risk management tools and keep an eye on market changes.
As for taxes, if you’re not sure you understand the topic enough, it’s best to consult a professional who can help you better understand what you should pay in tax returns.