What Are Realized and Unrealized Gains and Losses?

At the end of the day, profit and loss are what investors are looking into when trading any financial assets. An investment may be profitable on paper, but the profits aren’t real if you never actually sell your investment. That’s precisely why you must familiarize yourself with the concept of realized and unrealized gains and losses.

When a cryptocurrency that you own appreciates in value, the last thing you want is to sell when there’s a potential gain. On the flip side, there’s a saying in Wallet Street — “Bulls make money, bears make money, and pigs get slaughtered.” In other words, never be greedy! This is good advice, but it’s easier said than done.

In this guide, you’ll learn how to differentiate gains and losses that are realized or unrealized to plan your next move based on investment results. 

How Are Realized Profits Different From Unrealized Profits?

When a crypto investor sells his asset, he will gain a loss/profit, known as realized loss/profit. Likewise, any running profit or loss on the crypto asset is considered an unrealized profit/gain.