Realized vs unrealized gains

A realized gain is profit you've locked in by selling an asset, while an unrealized gain is profit on paper for a position you still hold. This distinction matters because taxes usually apply only when you sell, and unrealized gains can vanish if prices reverse before you cash out. For example, if you bought 1 ETH at $1,800 and it's now worth $3,200, you have an unrealized gain of $1,400. Sell it, and that $1,400 becomes realized and taxable. Hold instead, and a price drop to $2,000 shrinks your paper profit to $200 without you ever seeing the higher number in your wallet. Traders track both figures separately to plan tax bills and avoid confusing portfolio hype with actual cash in hand.