Crypto Returns and Losses Explained

Past returns, a platform’s advertised yield and a backtest answer different questions. None establishes what you will earn. Start by identifying the asset, reporting currency, measurement period and losses included. A profitable trade or rising token balance is not enough to describe the result of a whole account.

Separate realized results from changes in holdings you still own. An unrealized gain is a valuation at a particular time; the amount you could receive on sale depends on executable prices, liquidity and costs. Keep tax calculations separate from performance calculations because the rules and timing can differ.

For a complete account ledger, economic gain equals ending value plus withdrawals, minus starting value and contributions. Use the same currency and valuation time. Include cash, open holdings and liabilities, and count each external cash flow once. Deduct any relevant costs paid outside that ledger separately. A transfer between accounts inside the ledger is not a contribution or withdrawal.

Example: start with 1,000 units of your reporting currency, add 500, withdraw nothing and finish with 1,600. The gain is 100, not 600. This calculation gives a money amount. A meaningful percentage return with contributions at different dates needs a method that accounts for their timing; simply dividing by the starting balance is misleading.

For a single completed purchase and sale, compare net sale proceeds with the total acquisition outlay. Suppose the asset costs 100, the buy fee is 2, the sale brings 110 and the sell fee is 2. Net proceeds are 108; the gain is 6 on an outlay of 102, about 5.88%, before taxes or any other charges.

Include transfer fees, conversion charges, borrowing costs and actual funding payments where relevant. Avoid subtracting a cost twice if the reported proceeds already include it. All examples here are hypothetical arithmetic, not predictions or currently available rates.

Drawdown measures a fall from a previous peak. If a balance falls from 100 to 50, the drawdown is 50%. Returning from 50 to 100 requires a 100% gain. A 20% fall followed by a 20% rise produces 100 × 0.80 × 1.20 = 96, still a 4% loss.

Look at the path, not just the final return. Ask how large the worst fall was, how long recovery took and whether the result includes failed assets and accounts. A backtest can omit trading frictions and use decisions that were only obvious afterward. Check its assumptions before comparing it with actual results.

Suppose you hold 100 tokens priced at 1 unit each and receive 5 additional tokens. If the final price is 0.70, all 105 tokens are worth 73.50: a 26.5% loss before costs. The extra tokens did not offset the price fall. Check whether rewards are available to sell, paid in the same asset or subject to lockups.

Staking rewards compensate participation in a proof-of-stake network; penalties and service risks depend on the arrangement. Lending returns depend on borrowers or intermediaries meeting obligations. Promotional token emissions can decline while increased supply dilutes holders. These mechanisms require different checks; none is a substitute for measuring total value.

Sources reviewed on 15 October 2026.