Simply eyeballing the ticker doesn’t work anymore. If you want to calculate your crypto returns accurately to see where you’re going long-term, this is the way to go.

Introduction to crypto portfolios

If you have a portfolio of coins you’ve invested in, it is a good practice to check it regularly and track your returns either manually or by using crypto portfolio trackers. That way, you stay on top of your crypto portfolio’s performance and give yourself time to make changes as and when required.

However, the traditional methods of checking your crypto portfolio performance are outdated – eyeballing the tickets doesn’t help anymore. With the ever-growing need for diversification coupled with new coins every day, the size and variety in your portfolio likely keeps on increasing. 

Complexity can quickly get in the way of the productivity you need to trade coins effectively. With the tips laid out in this article, along with mentioned tools, you will find yourself getting more confident when it comes to calculating your crypto portfolio’s performance.

Factors to consider when calculating portfolio performance

Keep these factors in min while checking the performance of your portfolio:

1. Timeframe of your investment

Calculations will differ slightly when you’re investing for the long-term relative to the short-term. This is not only because time helps strengthen (fundamentally strong) investments, but also because capital gains taxes are calculated depending on how long you hold your tokens.

In India, you’re liable to pay capital gains according to your income tax slab when you’re selling your investments within 36 months of purchase. Post that frame, capital gains are 20% of your profits.

2. Types of tokens you hold

If you’re an investor in BTC, ETH, and other large and strong coins, you’re going to have a much more conservative risk/reward ratio than if you’re buying meme coins or other, more volatile altcoins. Since bigger coins have more tokens in circulation, they have significant market caps, which makes it harder for the market to move a lot in a short time. Hence, they’re more stable than smaller projects.

3. Initial investment

More capital means every slight percentage movement translates to a higher absolute rupee amount. The more your initial investment, the more important it is for you to engage in risk control practices.

4. Fees and taxes

Like we said, capital gains depend on the time for which you hold your tokens. On top of that, fees also involve the charges you pay to your exchange or your cold wallet, which also have to be incorporated into your return calculations as input costs.

Different methods of calculating your crypto returns

1. Percentage gain or loss

This is a simple method of calculating the performance of your crypto portfolio. It measures the change in value of the portfolio over a specific period, and is expressed as a percentage. This method is very commonly used by investors to assess the profitability of their investments. Here’s how you can do it too.

The only data you need is the beginning and ending value of your entire portfolio.

Here’s an example.

Suppose you started with ₹10,000. After a year, your portfolio gained ₹2,500 to become worth ₹12,500. Using the values in this equation:

[ (₹12,500 – ₹10,000) / ₹10,000 ] * 100 = 25%

This means that your portfolio gained 25% over that period of time. However, if you had incurred a ₹2,500 loss…

[ (₹8,000 – ₹10,000) / ₹10,000 ] * 100 = -20%

…you would have lost 20% of your capital.

2. Time-Weighted Rate of Return

This is another common method used to calculate the performance of your portfolio over a certain period of time. It eliminates the impact of external metrics like cash flows, making it a useful tool to calculate the long-term returns of several portfolios together. It uses the above percentage method, and adds another step to it.

Here’s an example calculation:

Suppose you have ₹10,000 at the beginning. You make the following investments:

• Buy ₹5,000 worth of BTC, which grows to a value of ₹7,000 after a year.

• Buy ₹2,000 worth of ETH which grows to ₹3,000 after a year.

• Buy ₹3,000 worth of BTC which falls to ₹2,500 in one year.

Calculate the growth rate of each investment:

• BTC: [(7000-5000)/5000] * 100 = 40%

• ETH: [(3000-2000)/2000] * 100 = 50%

• BTC: [(2500-3000)/3000] * 100 = 16.67% (loss)

Put it all in this formula:

[ (1 + 0.4) * (1 + 0.5) * (1 – 0.1667)](1/3) – 1 = 0.1573 or 15.73%

Therefore, the time-weighted rate of return for this portfolio is 15.73%.

3. Tools and resources

The above are ways to calculate your portfolio performance on your own. If you’re not into that, there are softwares that will do calculations for you automatically. Here are the most popular ones:

• Delta – Tracker that offers advanced analytics, alerts, and a range of integrations with popular exchanges.

• Binocs – Offers automated portfolio tracking, tax reporting, and real-time alerts for transactions.

• CoinStats – Gives users personalized crypto news, analytics, etc. Available on both desktop and mobile.

• CoinTracking – Enables users to track crypto portfolios, generate tax reports, and monitor price movements across multiple exchanges.

Improving your crypto performance

Here’s some ways in which you can do your part for improving your portfolio’s performance:

1. Research and diversify: Aim to do your own research and diversify your crypto portfolio across different tokens to reduce risk. Always choose fundamentally strong coins which have great communities, credible developers, and tangible value-adds. Spread your capital between NFTs, DeFi, and tokens to diversify further.
2. Monitor market trends: Keep an eye on market trends and news to stay informed about latest developments in the projects you’re invested in. This gives you time to identify opportunities and take advantage of them by adjusting your portfolio accordingly.
3. Use a stop-loss: Utilizing stop-loss orders are underrated for retail investors. They can help limit your losses and protect your gains by automatically selling your investments when they reach a predetermined price point. In a 24-hour market, stop-losses eliminate the need for you to constantly be engaged with your portfolio.
4. Have a generally long-term perspective: You’d do well if you take a long-term perspective on your crypto investments. That will help you avoid making impulsive buying or selling decisions on short-term fluctuations. Volatility is the name of the game, and the more you remove your emotions from your investments, the better off you’ll be in the long term. Try to focus on the fundamental value of the projects instead of their everyday movements and you’ll find yourself becoming more intentional with your choices.
5. Minimize fees and charges: Use an exchange that offers low fees for transactions, such as trading or buying / selling crypto. You can also minimize fees by using platforms that offer direct fiat-to-crypto transactions, eliminating the need for multiple conversions and associated fees. Limit orders instead of market orders also help you save a ton on trading fees. The trick is to trade intentionally, not impulsively.

Conclusion

So, there you go! That’s almost everything you need to know about how to calculate your crypto portfolio’s return and gauge performance in the long term. Although there are several other ways which you can use, these are the most common and easiest ones.

Maximizing your portfolio performance is all about being intentional about your investing / trading and choosing to invest in fundamentally strong projects that have a real world impact.