The key role of portfolio statistics and accurate record-keeping of transactions lies in effective management of cryptocurrency assets. For most individuals, actual profit is the ultimate criterion for deciding to engage in a new type of asset. However, keeping track of transactions presents a complex task that requires attention to a range of hidden details and peculiarities specific to cryptocurrencies.
Contents:
- Loss immediately after opening a new position
- Measuring portfolio profit in different currencies, including BTC
- Financial payments and interest rates for loans
- Analyzing trader transaction statistics and the influence of psychological factors
Loss immediately after opening a new position
When acquiring assets for investment using traditional (fiat) currencies, it is important to consider the difference between the buying and selling prices (spread). Regardless of whether the user purchases an asset on a P2P market or directly through an exchange service using a bank card, the price difference can be several percent compared to the current market price. The magnitude of this difference may vary depending on the asset.
Thus, any position opened using fiat currencies will have a small initial loss relative to the market rate. Before this position starts generating profit, it is necessary to overcome the spread difference.
When dealing with significant amounts, one may encounter narrower spreads and more favorable prices. However, as the purchase amount increases, associated risks also grow, such as technical issues during the exchange or manipulation from unscrupulous sellers. It is also important to pay attention to the current market conditions. Purchasing during periods of minimal price fluctuations is likely to be more preferable. On the contrary, high volatility can lead to an expansion of the spread as sellers seek to avoid losses in the event of sharp price changes.
Measuring portfolio profit in different currencies, including BTC
Calculating the profitability of a portfolio and individual positions also makes sense to be done in different currencies, including bitcoins (BTC), which were used to acquire crypto assets for investment purposes.
Most services and platforms designed for portfolio statistics tracking allow measuring profitability not only in fiat currencies but also relative to the exchange rate of BTC, ETH, and sometimes even BNB. This approach is particularly suitable for more experienced users who choose Bitcoin or Ethereum as their base currency and have a good understanding of market dynamics with its cyclical movements between altcoins and Bitcoin.
Enthusiastic supporters of cryptocurrency technologies, who are optimistic about their future growth, also utilize statistics tracking in relation to:
- BTC
- ETH
- BNB
For such users, the primary goal of trading is to increase the number of coins in their wallets on a long-term basis, so they pay less attention to cryptocurrency price fluctuations relative to the dollar.
Financial payments and interest rates for loans
When acquiring assets for investment not through traditional exchange services but using decentralized (DeFi) platforms, it is important to always consider the size of fees.
If there is a need to convert assets between different blockchains, especially when using Ethereum, it is important to take into account high fees. For example, at the time of publication, converting a token from the Ethereum network to Polygon and back would cost around $40, and transferring from Ethereum to BNB Chain and back would cost around $80. This is also an important factor when conducting arbitrage operations and other trading strategies.
Payment of fees is related to the technical features of decentralized exchange (DEX) platforms. Each operation on such platforms is processed directly on the blockchain and requires payment for its execution. In contrast, when buying and selling cryptocurrencies on centralized exchanges, interaction with the blockchain is not required until the user wants to withdraw funds from their account to an external wallet. Thus, interaction with the blockchain and payment of network fees occur only at the withdrawal stage.
Opening positions on futures markets, margin trading platforms, or positions using borrowed funds from DeFi protocols requires additional attention, as loan interest rates and funding rates will vary depending on the market situation.
In the case of margin trading on DEX, this aspect is of less significance, as loan interest rates are usually not subject to sharp changes. However, this characteristic is evident on decentralized lending platforms, which are fully dependent on the demand and supply of assets and are widely used for trading with leverage.
Analysis of trader's transaction statistics and the influence of psychological factors
Not everyone pays attention to the distortion of statistics in favor of successful trades, disregarding the losing ones. Often, newcomers in the market strive to create an image of a successful trader and publicly maintain statistics of their trades. Such open portfolios often appear unrealistic and serve only for authors to promote their services on social networks.
To analyze the real transaction statistics of a trader, access to a blockchain explorer is required, where the public address of their wallet can be studied, or access to the complete trade history of the trader on a centralized exchange. However, even in such cases, one cannot be sure that the trader is not managing other accounts that may be experiencing losses.
From a psychological standpoint, artificial inflation of statistics and impulsive trading decisions can be attributed to several factors. Among them, important ones are:
| Important Factors | Description |
|---|---|
| External Evaluation | An evaluation based on external factors such as appearance, attractiveness, and prestige. |
| Comments | User reviews and comments that can influence the perception of a product or service. |
| Emotional Effects | Effects related to users' emotional reactions, such as engagement, emotional attachment, and satisfaction. |
The effectiveness of a trading strategy largely depends on considering the timing of opening positions and managing them. Unlike centralized exchanges, decentralized solutions still offer limited capabilities for automatically notifying users of order execution, tracking proximity to potential liquidation (health factor), and other key metrics.
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