ROI in Crypto: The Guide Every Trader Should Know

You invested 1000€ in Bitcoin and today it has become 1500€. Great? Maybe. But how can you really know if it's a good ROI? That's where ROI comes in.

What is ROI, really?

The ROI (Return On Investment) is just a simple formula to measure your gains: (Profit ÷ Initial Investment) × 100. In the example above, you have an ROI of 50%. That's all.

But here lies the trap: 50%, is it good or is it bad? It depends on the context.

The real problem with ROI in crypto

Problem #1: Forgetting Time A ROI of 10% in 1 year vs 5% in 5 years. Which one to choose? Mathematically, it's different, but the ROI alone does not show it. You also need to look at the annualized.

Problem #2: The Invisible Risk An alt that rises by 300%? Wow. A blue-chip that rises by 30%? Less sexy. But which one was riskier? ROI ignores that. An ultra-volatile crypto can generate 200% ROI… but also -90% tomorrow.

Problem #3: The fees that nibble away When you trade, each buy/sell incurs fees. On 10 transactions, you easily lose 5-10% in commissions. The gross ROI doesn't take that into account.

How to Really Calculate Your ROI

The formula: ROI = (Current Value - Initial Value - Total Fees( ÷ Initial Value) × 100

Concrete example:

• You buy 1 ETH at €2000 )fees: €10 (
• You sell it for €2500 ) fees: €12 (
• Net profit = 2500 - 2000 - 22 = 478€
• Actual ROI = )478 ÷ 2000( × 100 = 23.9%

What you also need to follow

1. Market volatility: The price can fluctuate by 20% in a day. Your ROI can go from +50% to +20% in a few hours.
2. Your investment horizon: A 5-year HODLer does not calculate ROI like a short-term trader.
3. The risk/reward ratio: A ROI of 100% on an ultra-risky asset is not comparable to 15% on a stablecoin.

Conclusion

ROI is a tool, not a complete answer. Use it to compare your investments, but don't stop there. Also look at volatility, timing, fees, and your risk tolerance. The best investment is not always the one with the highest ROI.