On... Balance Sheet vs Income Statement

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"When crypto 20x in the next Bull Run, I'm going to sell everything so that I can accumulate more when the bear market arrives. How about you?"


That was what I was asked in Discord. Myself? I'm just going to hold my long term stack. Why? Because my long term stack sits in my Balance Sheet instead of my Income Statement. First, we have to understand what a Balance Sheet and Income Statement is. That is how I basically run and report my portfolio.


A Balance Sheet is the financial balances of an individual or corporation. It is where Assets and Liabilities are recorded. An Income Statement is a statement of Profit and Loss. So, how is my Networth recorded in this regard?


My long term holding goes into the Balance Sheet. And my day-to-day trade goes into the Income Statement. I consider long term holds as Assets and this portion of portfolio is not touched unless there is a need of additional cash or an emergency situation. My day-to-day trade is considered as Income. So, I buy/sell Crypto/Stocks as a form of income. These usually have a holding period of 1 to 3 months.


Now this gets a bit confusing (all my fault) when I report my Trading/Investment Performance - see Portfolio Update. These are the sections reported:- ROI (since Inception), Portfolio Growth (including savings), Trading Statistics.


For the ROI and Portfolio Growth sections, I report my Balance Sheet changes, which is the change of value of my long term holds. However, I also include my Cash and Open Trade Positions in this calculation. Basically it is a snapshot of my net worth (or change of net worth in this case) at a point in time. For the Trading Statistics section, I record my Income Statement, which is the PnL of my trades in a given year. Long term holds...i.e. Bitcoin that I'm planning to keep is not included in this section.


So going back to the Discord question - Am I selling all my crypto in the next 2 years? No - because a lot of crypto are Assets that sits in my Balance Sheet.

Comments

  1. AnonymousJanuary 4, 2024 at 7:23 PM

    Are your dividends/yields also treated as income or asset?

    ReplyDelete
    Replies
    1. KenboryJanuary 4, 2024 at 10:01 PM

      Both. Treated as income for that year but the cash from the dividend is added to the balance sheet.

      Delete

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