Good day everyone,

I hope you are all well and having a great day, welcome to CryptoGod-1's blog on all things crypto. Today I am going to do a quick post on the simple (although often considered difficult) math when it comes to understanding percentage gains and loses. This is important to understand, especially if you acquired crypto at a higher price than it currently is and are sitting on an unrealised loss.

The Math

When you buy an asset at X amount and it drops in value, you can clearly see a percentage loss associated with that drop. For example, if you purchased a crypto coin at $100 and it is now worth $50 then that is a 50% loss. Simple. However, when considering the percentage required for that coin to return to its original value, it is not quite as simple. Many would assume it just needs to rise by 50% once again to get back to the original levels, but that is not true.

When looking at the asset of the above example, the new price of $50 is now the starting point. A 50% rise from $50 would only amount to a $25 rise in value, leaving the asset at $75 and the owner still out of pocket from the original price they purchased it for. The reality of investing is that the owner of the asset would then need the coin to rise 100% from the new price of $50 just to break even. 

This can be calculated with a simple formula:

Percentage gain to break even = [1/(1-initial % loss)] - 1

An example of this would be for restoring a 20% loss:

[1 / 1 - 0.20)] - 1 = 1.25 - 1 = 0.25 = 25%

Therefore even though your initial has dropped 20%, the owner requires it to rise by 25% to breakeven once again, and all of this before considering any fees associated with the trade.

The Useful Math Table

Below I have done a quick guide showing the amount an asset would need to rise depending on its level of loss, based on increments of 5%. This applies to any investment, whether it be $10 or $10,000.

Initial Loss = Required Recovery Percentage

-10% = 11.11% 

-15% = 17.65% 

-20% = 25.00%

-25% = 33.33% 

-30% = 42.86% 

-35% = 53.85%

-40% = 66.67% 

-45% = 81.82% 

-50% = 100.00% 

-55% = 122.22% 

-60% = 150.00% 

-65% = 185.71% 

-70% = 233.33% 

-75% = 300.00% 

-80% = 400.00%

-85% = 566.67% 

-90% = 900.00% 

-95% = 1900.00% 

-100% = You're shit out of luck bro

Important to Remember

This is just how percentage works, whether its to do with investing or anything else. What a trader should always consider is the WHY when looking at the next price level of their asset. Is there a reason it has dropped so much, did you mistakenly buy in at the top, and what conditions are required for the asset to regain (and maybe even surpass that original level). It is important to understand the underlying value in the asset you are investing into, and if it has solid and sound fundamentals, such as Bitcoin, then there will always be confidence in its ability to regain those levels once again. Therefore while understand the percentages is important, it is not the most important part when it comes to trading. Its just good to know what youre talking about so you don't end up believing all you need is a 20& gain after a 20% loss.

Have a great day.

Peace. CryptoGod-1.

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