Return on investment (ROI) is a metric used by investors. It is derived from the ratio of net profit to the cost of investing.
Understanding the term
Having a high ROI for an asset means that it is extremely profitable to invest in. ROI is different in terms of crypto (due to the unpredictability of the market) and it is equal to the approximate value one receives as compared to the amount invested in the beginning.
Only after calculating the ROI can one appropriately choose an asset to invest in for profit. ROI can be calculated by subtracting the original value of a crypto asset from its current selling value and then dividing the result by the cost of investment. In a way, ROI helps investors and traders understand the overall performance and rewards of any cryptocurrency project.
For example, Solana (SOL) was launched to boost the DeFi market by expanding usage of DApps and smart contracts in a way similar to Ethereum. But unlike Ethereum, Solana uses a mechanism that is a unique hybrid of POS and PoH (proof-of-history).
The original price of SOL was $0.77 when it launched, but as its community grew, it reached $40.58 in June 2022 (which is an overall gain of 5,100% for people looking for high-ROI crypto projects).
A high return on investment or a positive value encourages investors, while a low ROI or negative value is enough to scare them away.