Breakeven Multiple

The amount by which a coin's or asset's current price must be doubled in order to reach its Breakeven Point (BEP) is known as the Breakeven Multiple. The initial investment made by a trader or investor (including trading commissions) is the breakeven point. In order to liquidate their positions without making a profit or loss, a trader needs the market price of an asset to climb above the price paid in order to break even. For instance, if a trader purchases a currency at $10 per unit in the market and it then drops to $5, he would need to see a 100% growth in the value of the coin to bring it back to his original price. The breakeven multiple in this situation would be 2. The multiple by which a cryptocurrency (or any other asset) must increase in order to achieve its previous All-Time High (ATH) may also be referred to as the breakeven multiple. Consider a cryptocurrency that, at its all-time high (ATH), was $1,000 but is currently trading for $250 (a 75% decrease). The breakeven multiple in this instance is 4, as a 4-fold gain (300% increase) is required to get the price back to its peak. Keep in mind that the breakeven multiple is an absolute number and not a percentage. If we take the drop percentage in the previous example—75%—the asset's price would need to rise by 300% (4 times) before it could reach $1,000 once more. By subtracting the beginning price (ATH or purchase price) from the current market price, one may quickly determine the breakeven multiple: x= Initial Price / Present Price Taking into account our prior illustration, we would get the equation shown below: x = 1000 / 250 = 4 The idea of the breakeven multiple demonstrates how a drop's actual percentage is far smaller than the percentage needed to recover from it. This suggests that after a reduction of 75%, a rise of 75% is insufficient to achieve break-even. Because of this, many traders employ stop-limit orders to limit their losses, especially during bear markets, which are characterized by protracted bouts of capitulation or panic selling.