How to calculate Bitcoin?
I will explain how to calculate the value of some amount of bitcoins in terms of USD, but obviously the USD can be replaced by any other currency, and the corresponding exchange rate.
There are three figures involved in this calculation:
- The value in USD.
- The exchange rate, which gives you the relation of USD to BTC.
- The amount of bitcoins.
If you look at the units of the figures, you can figure out the following formula:
value in USD = exchange rate * amount of bitcoins
Or expressed in the units of the terms:
[USD] = [USD/BTC] * [BTC]
As you can see, if you multiply the exchange rate [USD/BTC] with the amount of bitcoins [BTC], the units of the right side will be reduced to [USD], which is what we are looking for.
Example:
We have 0.005 BTC and the exchange rate is 200 USD/BTC.
exchange rate * amount of bitcoins = 200 USD/BTC * 0.005 BTC = 200 USD * 0.005 = 1 USD
You can also turn the equation around to calculate any of the other terms:
To calculate the exchange rate, you take the amount of USD you paid, and divide by the amount of bitcoins you received.
exchange rate = 'value in USD' / 'number of bitcoins'
