Why do Crypto Exchanges List Prices in Terms of being vs Bitcoin as opposed to USD? Help Figuring Out Cost Basis
Hey guys, I'm starting to dabble in the idea of trading altcoins and am having trouble wrapping my head around cost basis and also why do exchanges list Bitcoin in relation to USD but everything else in relation to Bitcoin?
Another question I have is after I start dabbling with a lot of coins at different times where the price of Bitcoin is wildy swinging meaning potentially what was initially $100 purchase of Bitcoin into another Altcoin, several weeks later when I sell the price of Bitcoin may be worth $500 more or $500 less in terms of where Bitcoin price was worth either when I used them or when I bought them. I then feel like I need to go back everytime and look at the price of Bitcoin on the day I purchased the altcoins to really figure out my cost basis.
Is there a better way of doing this? Any recommendations on other sites like cointracker where you can upload a csv of your trades and let it figure it out for you?
Yep, I've gone through the same thing, though I think if you end up getting the hang of this you can add a bit to each trade by buying your altcoin when it is at its weakest rate vis a vis Bitcoin. So if you're holding Bitcoin during some of these swings we've had lately, I've noticed that when the whole crypto market is down most other coins go down farther than Bitcoin does (there are a few exceptions that defy this trend.) So if I'm holding Bitcoin and there are 3 or 4 altcoins I want to take a position in I will go look at what they are trading at against BTC. I will pick the one that is down the most in relation to Bitcoin and buy it with my Bitcoin. And hopefully if I'm going back the other way I can watch for a time when they are closer together.
So in my first ever transaction I bought Bitcoin in order to buy Steem. I bought the BTC at around $2500 and it took 6 days for the purchase to clear. By that point it had gone down to $2350. But Steem had gone down even more so I ended up getting around 10% more Steem for my Bitcoin than I had originally calculated based on the dollar amount.
It's going to take a lot of practice to get used to all of these changing variables and be able to take best advantage of them. If anyone gives you a guide or system I'd love to see it!
Hey @clemdane thanks for the reply buddy. I was having a hard time tracking some of these coins when I had made various small purchases over time trying to figure out whether I'm up or down, etc. I just cleared out my cointracking.info account and reuploaded my Bittrex trades and it gives me a nice breakdown of where I'm sitting on everything. Overall I'm about even some coins up others down. Going to try to continue to accumulate on dips though. I've bought a bit of Steem over the past few weeks I've been on here and after looking things over I think Steem may be one of the better buys so probably going to throw a bit more into here. Not sure whether I want to continue to power it all up or save some as Steem for swing trading
Hey, that's cool. I hadn't realized you could do that with Cointracking. It's a good idea. I've been fairly surgical so far, so I know where each trade stands. My friend does something interesting - I don't think I want to do it, but it just shows another way to play things. He has bought small amounts of around 100 coins and he has set them to automatically be sold when they go up 20%. Then he has it set for when they fall by a certain amount he rebuys them. I'm thinking this is way too much trading and it also caps the total gains you can make when, for example, Stratis had more than tripled in a very short period recently. If you sold at only 20% you lost out on a massive gain. His thought is also that he can't possibly get to know all the coins and figure which ones are most worth trading so he's going to have to buy 1 of everything. I'd rather be a bit more strategic and if I'm planning to trade them pick ones that have large and regular swings to the up and downsides. Maybe pick the top 5 "swingiest" ones (um, yeah, "volatile") and play in those.
I agree about Steem, After it dipped below a dollar it zoomed up to $1.65 pretty quickly. Also, it looks like some people invested thousands of dollars in Steem Power and are now able to vote themselves hundred of dollars in self-upvotes. I think people must have created spreadsheets and done the math to see how much of that they were likely to get back (it seems a lot more complicated though.) At certain critical tipping points I think the Steem Power must actually start to pay for itself even apart from the fact that it's ultimately redeemable back to SBD.
That's interesting what your buddy is doing. Does Bittrex or Poloniex have a feature that allows him to do this automatically or does he use some service or did he write a script or something to do it for him?
I agree while 20% gains are nothing to turn your nose up at in the world of crypto thats kind of small relative to what some coins can do.
I'll ask him where he does this. I can't remember if he told me. Could be Bittrex. He definitely didn't write his own script.
Ha, someone was just telling me I should buy stuff that goes up 20% in an hour and sell it, then buy something else that will go up 20% in an hour, and if I keep doing that by the end of the week I can buy a house! Nice work if you can get it...
Not sure if you've seen this but I've seen a lot of people saying they are going to place dirt cheap Bitcoin orders on July 31 leading into August 1. Not sure if they are trying to cash in on a flashcrash or something. Have you heard anything about that and if so do you know how it works or what the logic is? I also hear other people who try this and wind up losing money on it somehow. Not sure if these are like futures orders or if they are just setting a limit order in which case not sure why they would be charged.
I am a bit perplexed about the psychology of this market over the next several days between now and the morning of August 2nd. There is a feeling of "something huge about to happen", but I can't tell which way it's going to play. I thought maybe people would start selling Bitcoin, but it seems it's continuing to go up. I had been hoping for a flashcrash because I've managed to assemble a nice chunk of change on the sidelines ready to buy. But it's going the other direction.
What I think is that many people are realizing that if they buy a ton of Bitcoin right now they're going to double their coinage when the fork happens. Futures of Bitcoin Cash are at $367 so that's a nice bonus for doing nothing.
I don't see how placing a super low limit order on a "good till cancel" basis (is that possible in crypto?) could possibly lose you money if it doesn't go through. The only way you'd lose money is if your buy went through, then Bitcoin crashed even lower than your low price. But even then I'd expect it to recover so again I don't see the danger.
But honestly although 2 weeks ago I was thinking there might be a flashcrash, right now I can't think of much reason for anyone to panic sell. I can really only think of reasons to buy.
The main thing is to make sure any Bitcoin you buy you immediately move to a private wallet and not leave on the exchange because some of them refuse to support Bitcoin Cash and you won't get your shares.
I think this is one of the hardest things to wrap your head around as a newbie to cryptocurrency.
I was just trying to explain this to my girlfriend for 20 minutes and she just sat there with this blank stare on her face... hahahah
I get that Bitcoin is kind of the base currency same way the USD is the base currency for world business.
What I have a hard time with is with a stock I buy at $1.50 and sell at $2 I made 0.50 cents.
With alt coins I may have Bitcoin that I bougth at $2000 6 months ago which is now worth $2700. I then use that Bitcoin to buy a couple alts, I sit on those for a few weeks and they change, but the price of Bitcoin also changes so waht is my cost basis?
Is my cost basis Bitcoin at calculated at $2000 which is the price I bought my Bitcoin at? Is it figured at $2700 the amount my Bitcoin was worth when I bought the alt?
Then it gets even more complicated trying to figure it out if I dollar cost averaged witha lot of small purchases over time because not only has the alt price changed but Bitcoin price itself has also changed.
BAM! you hit the nail on the head my friend. I have no idea how to do this either, right now I kinda am flying blind because I am not really sure HOW I should be calculating these things.
I haven't even gone as far as you with exporting trade data (have not done that many trades yet), but it does not seem to be helping you with this problem.
Maybe someone on Steemit has a great way to think about this that we just have not seen yet?
Yeah that site figures it all out for you but like you said I want to know how it's being calulated. Which Bitcoin price are they using to figure this...where I got in at or where Bitcoin was at when I bought the alt?
Let me know if you come across a solution.
Don't forget that the problem doesn't go away with $$ USD because if you buy something with X amount of $$$ that might be a day which the value of the $$$ is low and another day the value is higher and so you'd get more whatever for you $$$, assuming that too is the same price haha
On Poloniex their "Withdraw/deposit" page shows your current estimated value of combined wallet balances.
The whole point of cryptocurrency is that its traded IN BITCOIN not in USD. They created a coin called USD Tether that is almost the same as 1USD at all times. That can help you hedge against coin volatility if you think something is going to happen.
I'd grab the prices off of Coinmarketcap.com. Approximate values may end up being good enough.
I'll end up selling a bunch of crap coins at the end of the year for tax reasons anyway...
Hey @davevandewalle thanks I've been using that site and the coinindexsite. I finally got all my Bittrex trades uploaded into Cointracking.info and it gives a nice breakdown of where your sitting in various positions, neat little tool
lol because btc is easier to exchange for cash so you gotta cash out alts for btc and oh yeah I know the pain
WOW MAN! Great question! You took the text right out of my head. I bought some BTC and while waiting for my transfer to clear, I too made money, thanks to my brother @rulesforrebels.
But I am also wondering how the BTC swing will affect the other coins. Man I have a LOT to learn.
I get some of what @clemdane is talking about while some went into my eyes and out the ears. Foreign Language to me. I hope you learn it all,,,,so then I can learn it all from you. AWESOME POST! ;)
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STOPYea it's confusing. Like sometimes the price of something in dollars can be up but the bitcoin price can be the same as it was before or cheaper. It's hard to get my head around. haha