What is Breakeven Multiple?
Let's find out Breakeven Multiple meaning, definition in crypto, what is Breakeven Multiple, and all other detailed facts.
Breakeven Point (BEP) refers to the first acquisition cost that was paid by a trader or an investor. On that note, Breakeven Multiple is a number of how much the current price of an asset or a coin needs to be multiplied in order to achieve its Breakeven Point (BEP). The trader must wait for the price to increase again when it falls below the amount paid, so he could exit positions in a neutral state.
Also, the Breakeven Point formula in corporate accounting is calculated by dividing the total fixed costs involved with manufacturing by the revenue per individual unit minus the variable expenses per unit.
If you want to calculate the Breakeven Multiple here is the formula:
x = Initial Price / Current Price (Dividing the initial price by the current price)
x = 500/125 = 4
Breakeven Multiple is an idea that demonstrates what is needed to break even, such as a way higher percentage than the percentage of the drop. For instance, if there is the same 60% increase as was the drop, this will not be enough.
During bear markets and panic selling events, traders try to not face losses by using stop-limit orders.
To better understand the concept, let’s take a simple example. Let’s say you buy an asset at a market price of $55. Later on, the price falls to $27,5. This indicates that the value of the asset needs to double so that it could return to the original value. So, the Breakeven Multiple in this scenario would be - 2.
The ATH (All-Time High) of an asset occurs when it reaches the highest possible price. Breakeven Multiple can also showcase the needed multiple by which an asset needs to rise to reach its previous ATH.
Speaking of which, if a cryptocurrency ATH had experienced a significant drop such as a 75%-80%, the Breakeven Multiple might show that a 300% increase is needed. That way, the asset is able to achieve the best possible price yet again. But keep in mind that Breakeven Multiple is not the percentage. It is the number.