After deciding to enter the cryptocurrency market, it took some time to sort out the technical aspect of setting up a wallet, an exchange account and how to convert fiat into cryptocurrency. With that sorted out, I found myself with a new problem: how to keep track of my portfolio. Luckily, I had great mentors who were willing to share their experience.
Problem 1: Recording Purchases
Keep a record of how much fiat was converted to cryptocurrency was relatively straightforward; personally, I put in 700USD into ETH using Coinbase, and i received about 1.5 ETH.
However, as any newcomer will soon realize, most alt coins can only be purchased with ETH or BTC. This means that any purchases will cause a dip in ETH/BTC, and an increase in alt coins. After diversifying into about 5 other cryptocurrencies, I was forced to use an Excel chart to keep track of the dates and quantities of purchase, and what they were purchased with. Even then, it was a lot of work, as prices kept shifting each day.
CryptoCompare is a portfolio management website designed for cryptocurrencies. It allows users to keep track of their various cryptocurrencies, and monitor how they are doing.
Getting an Account
Go to www.cryptocompare.com
From here, register for an account at the top right of the page. It only requires an email and password, as it does not hold any of your cryptocurrencies, nor does it link to any wallets.
Upon registering, a verification email will be sent.
Click on the link, and your account will be set up.
With your account set up, it is time to create a portfolio to monitor your investments.
Create a new Portfolio.
Click on ‘Create Your First Crypto Portfolio’.
Give it a name and description, and click ‘Create’. The default currency used is USD, and it is recommended to keep it as such to prevent confusion.
A portfolio has been created!
Add in the cryptocurrencies purchased
In this example, I will be recording a dummy portfolio of BTC, ETH, LTC and IOTA. To get started, simple click on ‘Add Your First Coin’.
Fill in all the details in the page carefully, making sure that the ‘Buy Price’ and ‘Price Type’ are accurately filled. Make it a habit to update the portfolio each time you trade or invest in a cryptocurrency to ensure accuracy of the results.
An important point to note is that CryptoCompare allows you to key in the buy price in terms of cryptocurrency as well, rather than conventional fiat. For example, you could buy 100 LTC using ETH, and CryptoCompare will automatically convert that into USD.
After adding in all the currencies, CryptoCompare will show results in this format.
From here, there is a constantly updated stream of information about your Profits/Losses, Acquisition Cost and Holdings. It also shows you which of sections of your portfolio are doing well, and which are not doing so great.
Problem 2: Profit/Loss Calculation
Initially I was confused: CryptoCompare showed that I had gained in IOTA, but that ETH had increased in value as well. If I wanted to cash out, I would have to convert IOTA back to ETH. In that case, what happens?
However, some simple math demonstrated that CryptoCompare’s calculation in USD remained accurate.
John has 2 ETH. He purchases 100 IOTA for 1 ETH, when ETH is valued at 500 USD. The next day, IOTA is worth 6 USD, bringing its total value up to 600 USD.
At the same time, ETH has risen to 800 USD. If John wants to cash out, he would have to convert his IOTA back to ETH. Converting 100 IOTA to ETH would only get him 0.75 ETH.
However, as each ETH is now worth 800 USD, 0.75*800 USD = 600 USD. John has indeed made a profit of 100 USD from IOTA.
In this scenario, John would have made more money (600 USD) if he had kept both of his ETH instead of investing half in another alt coin. However, this is known as ‘hedging’, where he spreads out his risk across multiple currencies. While he potentially makes less money, he also stands to lose less.
John has 2 ETH. John purchased 100 IOTA for 1 ETH, when ETH was valued at 500 USD. The next day, IOTA is now worth 6 USD, bringing its total value up to 600 USD.
At the same time, ETH has dropped to 400 USD. If John wants to cash out, he would have to convert his IOTA back to ETH. Converting 100 IOTA to ETH would only get him 1.5 ETH.
As each ETH is now worth 400 USD 1.5*400 USD = 600 USD.
In this case, instead of making a loss of 200 USD, John has broken even.
Managing a portfolio is more than just recording down purchases and hoping that they increase in value. It is always important to invest with money that you can afford to lose, and to spread out risk by diversifying. Hopefully this helps any fledging investors who are having the same problems I did.