Free lesson · Crypto markets

Returns across two currencies

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Your reporting-currency return combines the token’s return in its quote currency and the quote currency’s return against your reporting unit.

A token can rise in stablecoin terms while its dollar value falls if the stablecoin depegs. Multiply gross returns instead of adding percentage changes exactly.

Separate external deposits and withdrawals from investment performance. A token balance increase can reflect a transfer rather than a gain. Keep timestamps consistent when comparing a 24-hour market with a conventional daily close.

Apply it in a strategy

• Attribute spot portfolio performance between asset movement and settlement-currency risk.
• Record the input timestamp, executable quantity, currency and horizon. Reconcile the result with a cash-flow or state table.
• Stress this failure condition: Adding returns omits the interaction term; unaligned measurement intervals can create false attribution.

Research deliverable

Build and explain a returns across two currencies worksheet. Attribute spot portfolio performance between asset movement and settlement-currency risk.

Evidence boundary: Synthetic arithmetic and scenarios illustrate mechanics. They are not historical returns, a paper replication, or evidence of an executable edge. Research sources and their access limitations are recorded at the end of this module.

# Python 3.10+; standard library unless NumPy is imported below.
# Inputs and outputs use the units defined in this lesson. Synthetic teaching example.
def reporting_return(base_return,quote_return):
    if base_return<-1 or quote_return<-1: raise ValueError("Simple returns cannot be below -100% for positive-price assets")
    return (1+base_return)*(1+quote_return)-1

print(reporting_return(.10,-.05))