Profit and Loss Analysis (Example Based on 30%)
The investor deposits 10,000 X coins and receives a 9,000 X coin loan.
This results in a total investment of 19,000 X coins.
The investor repays the loan over 10 months with an annual interest rate of 20%, making the total repayment after 10 months 10,500 X coins (9,000 X coin principal + 1,500 X coin interest).
1. If X Coin Increases by 30%:
The investor holds 19,000 X coins.
If X coin increases in value by 30%, the investment changes as follows:
19,000 X coins × 1.30 = 24,700 X coins.
Loan repayment: After 10 months, the investor repays a total of 10,500 X coins.
Profit Calculation:
Investment value: 24,700 X coins.
Loan repayment: 10,500 X coins.
Net profit:
24,700 X coins (investment value) - 10,500 X coins (loan repayment) = 14,200 X coins net profit.
In this scenario, the investor gains a net profit of 14,200 X coins due to a 30% increase in the value of X coin.
2. If X Coin Decreases by 30%:
The investor holds 19,000 X coins.
If X coin decreases in value by 30%, the investment changes as follows:
19,000 X coins × 0.70 = 13,300 X coins.
Loan repayment: After 10 months, the investor still has to repay 10,500 X coins.
Loss Calculation:
Investment value: 13,300 X coins.
Loan repayment: 10,500 X coins.
Net loss:
13,300 X coins (investment value) - 10,500 X coins (loan repayment) = 2,800 X coins net profit.
Despite a 30% decline in X coin's value, the investor still achieves a net profit of 2,800 X coins. This is because the leveraged investment allows the total investment size to mitigate the impact of the decrease in value.
Summary Profit/Loss Table:
Risks and Advantages:
Advantage: A rise in X coin's value yields significant profits for the investor. Due to the leveraged nature of the investment, even a 30% increase results in substantial gains.
Risk: If X coin decreases in value, the investor could face losses. However, even in this scenario, the loss is not complete, as the leveraged investment helps limit the total potential loss.
Last updated