Unit of Account
Currency or asset used to measure the value and performance of an investment or portfolio.
Beginner-friendly explanation
A unit of account is simply the currency you use to measure the value of your cryptos and gains. Example: You measure your portfolio's value in euros or dollars.
Intermediate-level insight
The unit of account helps clearly assess your performance by providing a fixed reference. It facilitates comparisons between different investments and strategies. Example: Even if you trade multiple cryptos, you use USDT as your unit of account to know exactly how much you're gaining or losing.
Advanced perspective
Choosing a relevant unit of account is crucial for accurate performance and risk analysis. In advanced strategies, the unit of account can be stable (stablecoin) or dynamic according to the strategy, effectively measuring real results adjusted for market volatility. Example: A professional trader uses a stablecoin (USDC) as a unit of account to measure performance independently from the natural volatility of traded cryptos.
Trading Basics
unit of account, reference currency, stablecoin, performance measurement, valuation, portfolio