ROI (return on investment) measures the gain or loss on an investment relative to its original cost, expressed as a percentage. A positive ROI represents a gain, while a negative ROI represents a loss.
The basic ROI formula compares the change in an investment's value with its original cost. In crypto, ROI can change significantly as asset prices move, and past ROI does not predict future results.
How Is ROI Calculated?
To calculate ROI, subtract the original cost from the current value, divide the result by the original cost, and multiply by 100.
For example, if you buy an asset for $1,000 and it is later worth $1,300, the ROI is 30%.
Fees and other trading costs can reduce your actual return, so they should be considered when evaluating the overall result.
ROI vs APR and APY
ROI measures the overall gain or loss relative to the original investment. It does not, by itself, standardize the return over a specific time period.
APR (annual percentage rate) expresses a rate on an annual basis without accounting for compounding. APY (annual percentage yield) includes the effect of compounding.
APR and APY are commonly used to describe yields from products or activities such as staking and lending, while ROI can be used to measure the return from a broader range of investments and trades.
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