Altcoin Profit/Loss Question

[jerry0]

I posted this in the trading thread and i got replies where im confused about investing in altcoins.  I had thought if you invest in an altcoin that is say 1 dollar.  Well if it goes to 2 doubles, well you double your money right?  Thus say you buy lisk at 5 dollars and say you buy 1000 of it for 5000 dollars plus trading fees.  If it doubles to 2 dollars, well you have 10000 dollars worth of lisk minus trading fees.  So you made 5k less trading fee profit right?  Well when i posted this, i was told look at the btc price.  For example if btc price for lisk is 0.0007 btc... and you were to sell lisk when it hits 6 dollars but btc went up, you could be selling lisk for 0.00065 btc.  They said because of that, you lost compared to holding btc.  At first i did not understand this but then they said you would have made more money if you held that btc as oppose to selling it for lisk.  That makes sense.  But i mentioned well in the example you still make 5k profit less trading fees right?  One person did say yes but others kept telling me that you lose money here.  First off, who is correct here?  I can understand you lose here in terms of getting less btc than you invested even though lisk goes up.  But in terms of profit... $ wise... which is the most important thing here right?  Then you are up money here?


This is what i posted in the trading thread and want it posted here since this is altcoin discussion and people want to know about coins that would 3x, 5x, 10x etc.




I am planning to use bittrex to trade altcoins.  I would first get bitcoin first as i need btc to buy altcoins.

So i have a question on this and want to know if im doing it right.

Let say I have $10000 in btc. 

Btc = 7837.34 usd now

1.28 btc = 10000 usd


I send that 1.28 btc to bittrex.  Lets just make it simple and say i want to buy lisk and its worth $5.  I know its much more than that now but i like to make it simple.  Let say i want to buy 1000 lisk so $5000 plus fees.  I know bittrex fees are 0.25%.  So that means buying 1000 lisk would cost me $5000 + $12.50 = $5012.50.  This is correct right?  So basically now my bittrex btc balance is around half which is 0.64 btc?  To make it simple i ignored the sending btc fee to bittrex.


So let say my goal is to sell it once i make 20 percent profit.  Thus i want to sell it once lisk hits 6 dollars.  Say lisk hits 6 dollars.  I then sell all of it for $6000 - $15 = $5985.  So in this situation I made $5985 - $5012.50 = $972.50.  Is that correct or not? 


So once I sell the lisk on bittrex, I'm getting back btc right since lisk is paired with btc and most altcoins are not paired with usd or usdt as they put it?  So here is what confuses me.  At that moment i will get paid whatever amount btc = $5985 right?  However... isn't it a good chance that i might not get more than 0.64 btc that i originally used to buy lisk assuming btc price went up as well?  Like for example at that moment i bought lisk with my btc...  $5012.50 is about 0.64 btc at that moment.  But now... when i trade $5985 worth of lisk for btc... couldn't i get even less than 0.64 btc?  Thus even though i made a profit of $972.50 in my example buying lisk and then selling lisk... i might get back 0.60 btc only and now my btc balance is only 0.64 btc +0.60 btc = 1.24 btc?  Or is there something wrong with what im calculating here?  I do know when you are investing in altcoins, you are basically betting against bitcoin.  But here in my example, well you need btc in order to buy altcoins almost all the time since theres maybe 10 coins that are paired against usd or usdt?


And if my calculation is wrong, can someone tell me where is my calculation wrong?


Because i believe the profit i calculated is right here.  And if it is right, how do i make sure to lock in these profits?  I know you realized $972.50 in profit here.  But say you dont sell the $972.50 worth of btc now... and wait... well btc price drops... that $972.50 profit could only be $800 or less etc right?  Or is my logic wrong here?  I want to know from daytraders on this as i know daytraders mostly buy low and sell high and make lot of these transactions.  Thus if your goal for lisk is 20 percent profit of 5000 dollars invested and your goal is to make about 1000 dollars on buying lisk minus the buy/sell fees of 27.50 for a total profit of $972.50... are you suppose to immediately send that exact profit $972.50 worth of btc OR WOULD IT BE THE BTC DIFFERENCE between the 1.28 btc you started with and what you have now... and then send it immediately to gdax or gemini and sell it to them and then you lock that $972.50 in profit immediately to your bank account?


The thing is if everything was paired with USD, then it would be very easy to calculate/profits and losses.  I know bittrex has usdt but that is only paired with btc and not many other coins.  So the other thing is would daytraders instead of sending it to gdax or gemini... they immediately turn that btc into USDT?  That way their profits are locked since you have usdt?  I know usdt is around 1 dollar but it cannot be a little less or more.  But i read its still an altcoin.  So i want to know exactly how daytraders lock in their profit after they lock in their profit from one coin.  And most importantly, is it even possible to have a lesser btc balance after buying lisk at 5 dollars and selling it at 6 dollars depending on the btc price.  Because this is very confusing to me.

[jerry0]

These are the responses i got


The deposit part is okay, the buying lisk part is also okay. Getting the profit and conversations are true. After you sell them for $6 each, you will have your balance as BTC, because there is no LISK/USDT market on bittrex. This means, you may make profit in terms of USDT, but you may be in the loss in terms of BTC if BTC price went up while you're trading it.




The problem is here:

  "Thus i want to sell it once lisk hits 6 dollars"
 
You do not get to sell your lisk for dollars.  You sell it for BTC.  When you put in your sell order you do not enter dollars, only BTC.

So in your example with BTC = $7838, then $6 is 0.0007656 BTC.  You could sell when lisk hits 0.0007656 BTC.   Of course by that time then BTC could go up or down and 0.0007656 BTC is no longer worth $6, it could be $5 or $8.  Its a moving target when trying to compare BTC and Dollars.

With altcoins your mindset needs to change from thinking in dollars to only thinking in Bitcoin.  Everything is measured against Bitcoin.  You never want to sell your lisk for less BTC than you purchased it for otherwise it would have been better to just hold your BTC rather than trade.




The USD price is there purely as a reference.  Use it or don't.

If Bitcoin drops then it makes altcoins look much more attractive.

Again, you need to stop converting everything to USD, work in BTC.  Trade your BTC for lisk at .0007BTC and sell when they are at .0008BTC.  Don't worry about the dollar, fiat is irrelevant to trading altcoins for bitcoins.  Fiat only comes into play when you cash out/in for BTC.

This is a hard concept to grasp but you need to forget the dollar, think in bitcoin.  Otherwise you will always be trading at a loss and will be broke very quickly.




In your example of buying lisk at $5/0.0007BTC and selling at $6/0.00065BTC, yes, you lost money.

If you had just held the BTC it went from $7142.85 to $9230.76.  Your 1,000 lisk only went up $1000USD minus fee's.  But your actual investment lost ground to BTC and dropped from 0.7BTC to 0.65BTC.   If you had just held the 0.7BTC it went up $1461.53, no fee's.  You lost over $461+ dollars by trading. 

Bitcoin is currently sitting at $8,000USD.  I think most of us expect it to pass $10,000USD in the next 60-90 days.  That is a 25% increase.  In order for your trading to be profitable you have to outperform 25%.  Otherwise just sit on your Bitcoin and do nothing while making 25%.

[jerry0]

Someone here comments


Yes, true. For every altcoin that's not paired with USD(T). Because then you will have to sell back to BTC, and you will get less BTC back than you had invested in this altcoin.

BUT technically you could have made a nett profit. Let me explain, with figurative numbers:

Let's say you're buying altcoin A with 1BTC. BTC is at $5000 and A is at $1. So you're buying 5000 A's.
After 2 months, the value of A went up from $1  to $2 and you want to take profit.
But BTC went up to $20k in the same time.
If you sell them now (back to BTC), you will get only 0.5BTC for your 5000 A's.
Then you can sell your 0.5BTC back to fiat, which will give you $10k. You have certainly made a profit, $5000 to be exact.
BUT: if you hadn't invested in altcoin A and had left your 1 BTC in BTC, you would've owned $20k now instead of $10k. So relatively you've lost money, against the BTC.



This makes the most sense to me.  This poster says you made fiat profit here.  But you lost compared to if you just invested in btc instead because you would have made more.  But here... money profit/loss is the most important thing here right?


I ask this because it seems like peoplt talk about coins that would 5x or 10x.  Well the issue here is according to some posters... even if an altcoin goes from 5 cent to 25 cents and 5x... well if bitcoin goes from 5k to 30k... well they would lose money because bitcoin 6x whereas your altcoin 5x when you sold it... that statement is wrong right?  Thus you lost if you held the bitcoin instead of buying the altcoin.  But in terms of money... which is the most important thing right?  Or is it btc increase?  Then you made profit here?

[jerry0]

Any other comments?