How do I use the bitcoin profit calculator?

The bitcoin profit calculator above will tell you your expected profits from selling bitcoin. All you have to do is input the amount you invested and the time frame of your investment, and youโ€™ll get a clear picture of the return on your investment.

Where did bitcoin start?

Bitcoin is a popular digital currency that pioneered the cryptocurrency space. Like other currencies, you can buy, sell, and exchange bitcoin. You can buy, sell, or use bitcoins at exchanges and stores that accept cryptocurrencies. 

In 2008 an anonymous person or group, Satoshi Nakamoto, created bitcoin. The inspiration for bitcoin was to create a digital currency that any government or international agency did not control. Satoshi stated that the world needed โ€œan electronic payment system based on cryptographic proof instead of trust.โ€

How is bitcoin different from other currencies?

Unlike traditional currencies, bitcoin is a decentralized digital currency. Bitcoin is a digital currency because there is no physical representation. There are no bitcoin dollars or bank notes that represent bitcoin.

Bitcoin is also considered a decentralized currency. Compared to the Euro or the U.S. dollar, bitcoinโ€™s supply is not controlled by a government-run bank. The creator of bitcoin made it so only 21 million bitcoins could ever be produced. Thus, the value of bitcoin can only be affected by how much people value the digital currency and not by increasing or decreasing bitcoinโ€™s supply.

Where is bitcoin produced?

Bitcoin is produced in a process called bitcoin mining. Bitcoin mining involves computers solving complex mathematical problems that are rewarded with bitcoin. The first computer to solve a given problem receives the next bitcoin block, and the cycle continues.

Bitcoin and other cryptocurrency mining are expensive and rewarding. Many large and public companies have been formed with the sole purpose of mining cryptocurrencies.

Bitcoin was created to have a max number of 21 million bitcoins. As the number of bitcoins in circulation increases due to mining, the bitcoin rewards decrease. This ensures that the supply will gradually increase over time.

What is bitcoin profit?

Like any asset, you can buy or sell bitcoin to make a profit. The easiest way to think of it is by treating bitcoin as a stock or bar of gold. Stock and gold prices fluctuate, giving people a chance to buy and sell them for a profit.

Calculating profits is easy when you buy and sell bitcoin with money you donโ€™t borrow. If you buy bitcoin at $20,000 and sell it for $25,000, you will make a $5,000 profit.

Some people will buy bitcoin with borrowed money or on a margin. When you buy assets with a loan, the loan payments will go against your profits. In the same example where you make a $5,000 profit, any interest you pay on the loan will be deducted from your earnings.

Are bitcoin profits taxable?

Bitcoin profits are taxable. However, how you receive or use your bitcoin will determine the taxes you owe.

If you buy or sell bitcoin, your profits are subject to the same taxes as selling a stock. These taxes, known as capital gains taxes, occur once you sell any bitcoin.

If you buy bitcoin at $20,000 and sell it for $25,000, the $5,000 profit will be taxed. If you are holding onto bitcoin and its value increases, no tax will be owed. Only the sale of bitcoin is a taxable event.

Bitcoin miners face taxes when they receive a new bitcoin from their mining activities. As soon as bitcoin miners receive the bitcoin, the value of that bitcoin is taxed.

Rules around cryptocurrency are constantly changing. Bitcoin and cryptocurrencies are new and less understood than other asset classes. Thus, you should expect to see new laws and precedents created for cryptocurrencies in the upcoming years.

Can I withdraw bitcoin profits?

Bitcoin profits occur when you sell an amount of bitcoin for another currency. In the example where you sell bitcoin and make a $5,000 profit, the profits are in your chosen currency.

People can buy and sell bitcoin through several brokerages and cryptocurrency exchanges. Most people will buy and sell bitcoin in their nationโ€™s currency. Thus, the profits will not be represented in bitcoin but in whatever money you choose.

Like other exchanges, you can withdraw bitcoin profits whenever you like. Itโ€™s important to know that the taxable event is selling your bitcoin and not withdrawing profits from the sale of your bitcoin.

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