Bitcoin Profit Calculator – Forbes Advisor

Few mainstream financial assets are as volatile as Bitcoin (BTC).

The world’s largest cryptocurrency hit an all-time high just under $69,000 in November 2021, and at the time of writing is around $24,000.

That is a significant loss if you bought BTC at the peak. However, if you bought in January 2021 and sold at the peak price, you would have made a profit of 115%.

Volatility like this is why Bitcoin investors need to keep an eye on their profits. To help with your analysis, our Bitcoin Profit Calculator provides you with a simple tool to keep track of your potential gains and losses.

Bitcoin Profit Calculator: Our Assumptions

This calculator uses the current market price of Bitcoin to estimate your return over a specific time period.

You can override the live data if you prefer to calculate your Bitcoin profit at different prices. This can be used to place stop loss and take profit orders to manage your risk.

To estimate the profitability of investing in Bitcoin, a wide range of variables must be considered. Factors include price drift, transaction fees as well as deposit and withdrawal fees.

Taxes should also be a consideration, but they can vary widely from country to country. In the US, the IRS treats all cryptocurrencies as capital assets. That means you pay capital gains when you sell crypto (or Bitcoin, in this case) for a profit.

Below are the assumptions made in the Forbes Advisor Bitcoin Profit Calculator:

• Purchase price for bitcoin: The price you bought Bitcoin at, before fees.
• Bitcoin selling price: The price you sold your Bitcoin at, before fees.
• Investment amount: The total amount of Bitcoin purchased in dollars. This will default to $100 unless you specify a custom amount.
• Investment fees: Some platforms charge a fee on transactions, especially if those transactions are in fiat currency, or if you have to go through an intermediate step, such as buying stablecoins like USD Coin (USDC) or Tether (USDT) before buying Bitcoin. Trading fees on the original transaction should also be included for maximum accuracy. Trading fees will depend on whether the investor is a maker (buyer) or taker (seller). There may also be other fees included. Nevertheless, all fees should be totaled and included as one entry in the calculator for maximum accuracy.
• Withdrawal fees: Some platforms require a fixed amount or a percentage to withdraw crypto. You may need to shop around and see if it is best to convert Bitcoin to fiat currency before withdrawing it, especially for large amounts.
• Profit loss: This is the return on the trade. If a profit is made, an investor may be liable for tax.
• Total investment amount: This is the total dollar amount of the transaction, including any fees listed in the “investment fees” section.
• Total output amount: This is the total dollar amount that the investor receives at the end of the day, including all fees. Please note that taxes are not taken into account.

How can I earn from Bitcoin?

As we have mentioned above, the price of Bitcoin is extremely volatile. If historical data is any guide, this suggests that it might be wise to take some money off the table after explosive BTC bull runs.

It also suggests that buying Bitcoin during extreme dips can be profitable if investors are prepared to handle short-term volatility. As with any investment, past performance is never a reliable indicator of future returns.

While Bitcoin is a huge challenge for long-term investors, it is an even harder beast to tame for traders. Drops and gains of 10% to even 20% in a day are not unheard of.

What about average investors? Well, short term trading in BTC is only suitable for experienced traders. Like most temperamental assets, traders need to be extra vigilant. Stop losses and take profit orders are essential, as the market can move in an instant.

Risk management must always be at the centre. A close eye also needs to be kept on correlations if traders wander outside of Bitcoin and into the broader cryptocurrency space, as altcoins are known to move in step with Bitcoin.

Finally, the trading platform should only be chosen after careful consideration. There are many options in the space and current crypto regulations remain lax.

Does the IRS Tax Bitcoin Profits?

In the US, you have to pay capital gains tax when you sell Bitcoin at a profit.

In fact, the IRS asks a specific question on your tax form about crypto: “At any time during [the year]did you receive, sell, exchange or otherwise dispose of financial interests in a virtual currency?”

For federal tax purposes, all digital assets are considered property. This means that if you sell, exchange or otherwise use crypto that has increased in value, you will trigger a taxable event.

However, how long you hold Bitcoin before the sale is important. If you bought Bitcoin for $5,000, for example, and sold for $6,000 less than a year later, that $1,000 gain would be taxable as ordinary income. The percentage amount will be dictated by your federal tax bracket. These brackets vary between 10% and 37%.

If you held your Bitcoin holdings for a year or more, it would be classified as a capital gain on par with traditional securities such as stocks.

Whether you are a long-term investor or short-term trader, it is best to seek professional help regarding the area of ​​Bitcoin taxes.