PnL in Crypto: The Guide Every Trader Needs to Master

Have you ever closed a trade and didn't know if you really won or lost? Most crypto traders make this basic mistake: they don't fully understand what PnL is (Profits and Losses).

Yes, it sounds simple. But here's the trick: in crypto, it's much more complex than in traditional finance. There's realized PnL, unrealized PnL, mark-to-market (MTM)… and if you don't master these differences, your portfolio will be a mystery.

Let's break this down into parts

What is PnL really

It is the value change of your positions over a specific period. Period. But what is interesting is how you calculate it, because the method you choose can drastically change your result.

Real example: You bought ETH at $1,900 (entry price). Today it is at $1,600. That difference of $300 is your unrealized PnL. Why “unrealized”? Because you haven't sold yet. The moment you sell, it becomes realized.

MTM: The price that really matters

Mark-to-Market is simply the current market price of your asset. A Bitcoin that you bought for $30,000 and is now at $45,000 has an MTM of $45,000. Trading platforms use this to calculate your P&L in real time.

The Three Calculation Methods That Change Everything

1. FIFO (First In, First Out)

You use the price of your oldest purchase. Perfect if you bought at different times.

Bob's Case:

• Bought 1 ETH at $1,100 (transaction 1)
• Bought 1 ETH at $800 (transaction 2)
• Sold 1 ETH for $1,200

With FIFO, you assume that you sold the first one you bought:

• PnL = $1,200 - $1,100 = $100 profit

2. LIFO (Last In, First Out)

Contrary to FIFO: you use the most recent purchase price.

Same case as Bob with LIFO:

• PnL = $1,200 - $800 = $400 profit

Do you see the difference? Same ETH sold, same price, but $300 more profit. This matters legally in some countries.

3. Weighted Average Cost

Average all your purchase costs.

Alice's Case:

• 1 BTC at $1,500 + 1 BTC at $2,000 = $3,500 total
• Average cost = $3,500 ÷ 2 = $1,750 per BTC
• Sold 1 BTC for $2,400
• PnL = $2,400 - $1,750 = $650

This method is the fairest for long holdings.

Realized vs Unrealized: The Crucial Difference

Not Executed: This is what you see in your trading app right now. You still have the position open. A mirage that can disappear.

Realized: It only exists when you close the position and convert the P&L into real money ( or stablecoin ). This is indeed irrevocable.

Example:

• You bought 10 DOT at $70 = investment of $700
• It is at $100 = $1,000 in your wallet
• Unrecognized P&L = $300 ( but still being paper)
• You sell it at $100 = Realized P&L of $300 ( is now real)

Perpetual Contracts: A Different Animal

In perps, the total P&L = realized P&L + unrealized P&L. Additionally, we need to add:

• Trading fees
• Financing fees ( what you pay/receive for maintaining leverage )
• Slippage

A trader can have a “technical” gain of $1,000 but lose $300 in funding fees.

Additional Methods That Matter

Percentage Benefit

It is not the same to earn $100 on a $1,000 investment as it is on a $10,000 one.

• You bought 1 BNB at $300
• You sold it at $390
• P&L = $90
• P&L% = ($90 ÷ $300) × 100 = 30% return

This number does compare strategies of truth.

Year to Date (YTD)

Measure your performance from January to today ( or fiscal year, as you prefer ). Useful for:

• Declare taxes
• Analyze annual performance
• Compare yourself against the market

Example:

• January 1, 2023: $1,000 in ADA
• January 1, 2024: $1,600 in ADA
• Unrealized gain = $600

What Exchanges Don't Tell You

Simplified calculations ignore:

• Taxes (vary by country, some charge on each transaction)
• Platform Fees (trading/withdrawal fees)
• Intraday volatility (you can enter at $1,000 and exit at $900, then rebound to $1,100)
• Price Slippage (the price you see and the one you get are different on large orders)

In real life, a trader can have +50% in technical P&L but -15% after taxes and fees.

The Secret Weapon: Systematic Tracking

Any basic spreadsheet (Google Sheets, Excel) that records:

1. Purchase Date
2. Entry Price
3. Amount
4. Opening price
5. Fees paid

…gives you total clarity. Automated trading bots can do it for you, but understanding the concept first is critical.

The Finish Line

Understanding P&L is the difference between trading with data and trading blindly. Knowing exactly how much you gained or lost on each trade, in real percentage, allows you to:

• Identify profitable strategies
• Cut losses quickly
• Make data-driven decisions, not emotional ones
• Declare taxes correctly

You don't need to be a mathematician. You just need to choose a method (FIFO, LIFO, or average), apply it consistently, and let the numbers speak.