Crypto Savvy Life

A loss of 50% requires a gain of 100% just to get back to where you started!
If that isn’t clear then read on below and we will explain some more.

It may seem simple but percentages can be really misleading and a greater understanding will affect how you review statistics that are given out and your reaction to them.

Percentage Loss

For most people, it is when their crypto has gone down in value that the misunderstanding of percentages can be most confusing.

Imagine, you wake up and the first thing you see is that your crypto portfolio is ‘Down 5%’. We are going to refer to this as a percentage loss.

Once your portfolio has gone down it is only natural to want it to go back up again. However, people often think the percentage gain required to do so is the same, it is not!

In this example, a percentage loss of 5% requires a gain of 5.26% to get back to where you started.

This may not seem a big deal, and indeed for small percentage losses it is not.

However, as frequently happens in crypto, if your Altcoins are down 30% then in order for your Altcoins to return to their starting price they now need to gain 43%!

Here is an example:

You start with $100 of SavvyCoins
You wake up one morning and your SavvyCoins have gone down in value by 30%.
They have lost 30% or $30 of value so now you have only $70 of SavvyCoins.

You then have to decide what to do with your SavvyCoins.

“It went down by 30%, so I will just wait for it to go up by 30%”

However, your $70 of Savvycoins have to go up in value by 43% to get back to the $100 value you started at.

If you take this to an extreme, a loss of 90% means to get back to your starting position the value would need to go up by a whopping 900% !!

Percentage Gain

When your crypto has gone up or gained in value it can also be misleading.

Example:

You start with $100 of SavvyCoins.
Overnight it goes up by 40%!

Your SavvyCoins are now worth $40 more, so now you have $140 of SavvyCoins.
However, if your $140 goes down by only 29% you are back at $100!

Comparing Percentages is not easy!

Percentages are calculated on the change in a value over a fixed period of time. It does not make a distinction for the value of the item. A small percentage change of a large value can be worth more than a large percentage of a small value.

Example:

Say you can buy 100 SavvyCoins for $1

The market is flying and Elon says he wants SavvyCoins for people to buy Tesla.
Overnight your SavvyCoins go crazy and go up 1000%.

Your 100 SavvyCoins are now worth $11. The value has increased by $10.

Alternatively,

Say you can buy 1 Bitcoin at $20,000.
Overnight Bitcoin gains 5%.

Your 1 Bitcoin is now worth $21,000. The value has increased by $1000

You can therefore see that a 5% increase in Bitcoin was worth a lot more than a 1000% increase in SavvyCoins!

That is because you only had $1 of SavvyCoins and $20,000 of Bitcoin.

If you had $20,000 of SavvyCoins you would then have had $20,000,000!

Should I HODL when my AltCoins crash?

HODL’ing (Holding On to your coins for Dear Life) is considered a robust strategy for some investors and many Bitcoins HODL’ers can demonstrate the massive gains that they have achieved by doing so.

However, it is something you should properly consider especially if the coin being considered was actually a spur-of-the-moment buy that you only really considered for a short-term gain.

If, as has happened following the FTX crash, a number of Altcoins have gone down in value by 90% you have to take into account that it will now require those coins to increase by 900% just for you to get your money back!

Do you really believe in them that much? or would you be better off moving any remaining money into something else!?

As a comparison Bitcoin has only achieved a gain greater than 900% /yr 4 times in the last 14 years.

Bitcoin Annual Percentage Return

Conclusion

If you correctly understand the significance of the percentage numbers you may see quoted regarding losses and gains then you will be better informed when making your decision to HODL or NOT.