Definition ∞ Unrealized profit represents the gain on an investment that has not yet been converted into cash through a sale. This profit exists only on paper, reflecting the current market value exceeding the initial purchase price. It is a temporary gain that can fluctuate with market conditions. This metric indicates potential earnings if an asset were to be sold at its present valuation.
Context ∞ In the context of digital assets, unrealized profit is a significant consideration for investors, particularly given the rapid price swings common in cryptocurrency markets. Discussions often involve strategies for managing these paper gains, including tax planning and risk assessment before converting them into realized profits. Monitoring unrealized profit provides insight into market sentiment and potential selling pressure among holders.
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