Recently, I noticed that many people in the crypto community get confused about assessing their investments—especially when it comes to long-term portfolios. That’s why it’s worth understanding CAGR, which stands for совокупным годовым темпом роста (compound annual growth rate). It’s truly one of the most reliable ways to understand how your investments actually performed.

What’s the essence? CAGR shows the average rate at which your asset would have grown each year if the growth had been even. It sounds simple, but it’s a powerful tool. The formula looks like this: take the ending value, divide it by the starting value, raise it to the power of (1 divided by the number of years), and subtract one. Multiply the result by 100—you get a percentage.

Why is this especially important in crypto? Because volatility is enormous. The price can jump by 300% in a year and then drop by 60% in the next. If you only look at the final result, you can misjudge your strategy. CAGR accounts for compound interest—the compounding effect, where profits start generating more profits.

Here’s how it works in practice. Suppose you invested $1,000 three years ago. Now it’s $2,700. You can’t just say whether that’s a good or bad outcome. But CAGR will show that your investments grew by about 39% per year. That gives you clarity.

I use CAGR for comparison. One coin grew from 10 to 50 over two years, while another grew from 100 to 400 over four years. At first glance, the second one looks better. But when you calculate CAGR, the first one gives 123% annualized, and the second only 41%. See the difference?

Another point: CAGR doesn’t account for volatility along the way. It’s not the true return—more like a representative figure. It’s just a number that describes how investments would have developed if they had grown steadily. But for long-term planning, it’s indispensable.

If you take your portfolio seriously—especially if you hold several assets—CAGR is a tool that helps you make informed decisions. Not just looking at the current price, but understanding the real story of growth. That’s why many traders and investors pay attention to it.