Mathematics of Profit evaluation while trading in Cryptocurrency

In this article, we are going to look at the most important part of trading in cryptocurrencies, i.e. evaluating profit. Look at the following scenario of trading:

Note: I have taken real scenario in case of ETH (Mayank), and some imaginary coins for another user (Ranjot)

Now, do not get me wrong by the above scenario, I'm not saying you to invest one specific cryptocurrency, trading in multiple digital currency is more reliable and can give us better ROI (If we know how to evaluate profit while working with multiple digital currencies or altcoins (alternative currency))

But if we look at the above scenario, Mayank just traded in one digital currency, while Ranjot spent his nights in searching altcoins and then investing in it.

This is what makes it interesting, how to extract the profit from one altcoin and put in other.

Firstly, we need to look at what to take as reference while trading in cryptocurrencies. There are two scenarios here:

1. Those who invest in only one digital currency
2. Those who invest in multiple altcoins

Those who invest in only one digital currency (can be BTC, ETH or any other)
Users who invest in only one digital currency (say ETH, BTC) can compare their profit with FIAT value

Those who invest in multiple altcoins
When it comes to users who invest in multiple altcoins, then scenario changes. User should look at the profit by comparing it with the digital currency which he/she used for trading (say BTC, ETH, NEO)
Below Scenario can help you to understand it in better way:
Say, if Ranjot buys x altcoin’s token at 1000 satoshi (smallest unit of BTC), then while selling it, he should look at whether he is getting more than (1000 satoshi + transaction fee) or not as if he didn’t even do that transaction (purchasing altcoins) he would have that 1000 satoshi.

For example: (Taking Real example)

Scenario 1:
1 QTUM/ETH was at 0.021415 ETH on 09-Dec-2017
1 QTUM/ETH is at 0.05694 ETH on 04-Jan-2018
Thus, 0.035525 ETH is the profit we’re getting now (excluding transactions fee). We can say now we have made 165% of profit in this time span

Scenario 2:
Case where people might believe they are in profit but reality is bit bitter:
(By comparing with FIAT value)
1 EOS was at 4.12 USD on 15-Dec-2017
2 EOS is at 4.57 on 04-Jan-2018
Now, it looks like we’re at 0.45 USD profit but actually not!!
If we look at purchased ETH value, it was 0.012243 ETH on 15-Dec-2017 and it is 0.008978 ETH. Thus, if we keep holding ETH, we would get more profit

TIP:
Satoshi is the smallest unit of BTC. More on Satoshi (https://en.bitcoin.it/wiki/Satoshi_(unit))
Similarly, for ETH smallest unit is Wei.