Unrealised profit/loss data is now available via the portfolio section on the mobile app.
Whether you're a seasoned investor or just starting out, understanding your unrealised profit/loss (p/l) is essential for making informed investment decisions. Unrealised p/l reflects the gains or losses on your investments that haven't been sold yet. These numbers can represent potential opportunity or risk that may influence decisions about when to sell, rebalance your portfolio, or manage your tax liability. Monitoring unrealised p/l helps you keep track of performance and align your strategy with your financial goals.
In this article, we will cover:
- Cost basis
- Holdings value (current market value)
- Calculating unrealised p/l using the FIFO method
Cost basis: the foundation of your investment value
The cost basis is the original value of an asset. It includes the purchase price plus any associated costs, such as commissions or fees. The cost basis is crucial for determining how much you've gained or lost on an investment.
For example:
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If you buy 2 BTC at $150,000 each, your cost basis is $300,000.
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If you later buy another 1 BTC at $160,000, your total cost basis becomes $460,000 for 3 BTC.
Tracking your cost basis accurately ensures you can properly calculate your unrealised (and realised) gains or losses when you eventually sell.
Please note: if crypto assets are deposited into your account, we assume the cost basis to be the market value at the time of deposit. This might not match the true original cost basis of your asset, hence why our unrealised p/l figures are only an estimate.
Holdings value (current market value): what your investment is worth now
The holdings value, or current market value, of an asset is the price at which it could be sold on the open market today. It fluctuates based on supply and demand, market sentiment, and economic factors.
Using the previous example:
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If the holdings value of your BTC is $170,000 per token, the market value of your 3 BTC is $510,000.
Knowing your holdings value lets you see how your investments are performing relative to your cost basis and is essential for evaluating unrealised profit or loss.
Calculating unrealised profit and loss using FIFO
FIFO (First-In, First-Out) is a common accounting method used to calculate unrealised (and realised) profit and loss. Under FIFO, the oldest assets purchased are considered sold (or withdrawn) first when calculating gains or losses.
Here’s how unrealised p/l is calculated using FIFO:
Example 1:
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Purchase 1: 2 BTC at $150,000 = $300,000
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Purchase 2: 1 BTC at $160,000 = $160,000
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Current Market Price: $170,000 per token
You still hold all 3 BTC. Under FIFO, the cost of the first 2 BTC is $150,000, and the next 1 BTC is $160,000.
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Market value of all BTC: 3 × $170,000 = $510,000
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Total cost basis (FIFO): $300,000 + $160,000 = $460,000
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Unrealised profit: $510,000 – $460,000 = $50,000
Even though you haven’t sold your crypto, FIFO gives you a clear view of what your profit would be if you sold your oldest BTC first.
Example 2:
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Purchase 1: 2 BTC at $150,000 = $300,000
- Sell 1: 0.5 BTC at $155,000 = $77,500
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Purchase 2: 1 BTC at $160,000 = $160,000
- Sell 2: 0.5 BTC at $165,000 = $82,500
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Current Market Price: $170,000 per token
You sold 1 BTC in total, meaning you still hold 2 BTC. Under FIFO, the 1 BTC sold is taken from your oldest holdings, so the cost of the first 1 BTC is $150,000. You therefore have 1 BTC remaining with a cost basis of $150,000, and 1 BTC with a cost basis of $160,000.
Unrealised p/l:
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Market value of all BTC: 2 × $170,000 = $340,000
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Total cost basis (FIFO): $150,000 + $160,000 = $310,000
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Unrealised profit: $340,000 – $310,000 = $30,000
Realised p/l:
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Sale proceeds from all BTC sold: $77,500 + $82,500 = $160,000
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Total cost basis (FIFO): 0.5 BTC x 2 at $150,000 = $150,000
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Realised profit: $160,000 – $150,000 = $10,000
Please note: if crypto assets are withdrawn from your account, we treat these like a sell and the volume withdrawn is taken from your oldest asset holdings.
Understanding unrealised profit and loss, along with key concepts like cost basis, holdings value, and FIFO, could help with investment decisions. It allows you to track performance, plan exits, and manage taxes more effectively. By keeping a close eye on unrealised profit/loss, it can help you capitalise on opportunities and avoid surprises down the line.