Best Performance Metrics for Crypto Funds (Profit Calculator)
How do you know whether a Crypto Fund is offering you good returns? Sure, it gave you multi-digits returns last year. But is it really good enough? No clue, right? Looking at the standalone performance of a fund will not help you answer that query. Well, it is a common dilemma faced by many Crypto Fund Investors (also includes the people who individually manage their cryptofolio).
Problem Statement.
Being from an equity market background (where +20% Compounding Annual Growth Return (CAGR) is considered excellent), the return statements of crypto funds is always a point of amazement for me. Multi-digits annual returns (in %).
*all time is just 1 year 4 months.
2) Base Currency.
If the funds are raised in a prominient crypto (mostly Ether) then how does the existing statistics model reflect the true figure of our investments, provided that the investors bought the base currency at $10, $100 and even $1000 whereas the performance is pegged to a particular fiat price of any particular date decided by the managing team. Another big issue.
3) No Brainer.
Why take the credit of something which can be achieved easily with less or no efforts? If you had all alone invested in top 3 to 5 crypto currencies (by market cap), you already have cultivated multifold returns. And the same trend will follow up in future. Just simply diversify your funds into top few cryptos.
Solution Statement.
The only solution is to create an appropriate benchmark. You should always compare the performance of a crypto fund against its benchmark. It would give you a better idea about the performance.
If the fund has managed to beat its benchmark, it shows that the fund has done very well. If it has managed to beat the benchmark by a big margin, it shows that the fund managers have very good crypto-picking skills. Also even if the fund has managed to give positive returns but it didn’t overlap the benchmark returns then it’s not good.
What‘s the ideal Benchmark?
It can be any top crypto like Bitcoin or Ethereum. A group of top few crypto currencies can also be the good benchmark.
However, be sure not to over review your cryptofolio. Reviewing your folio too often might land you up with wrong decisions on short term fluctuations. You should review the portfolio once in six months or in a year.
Remember, crypto is here to stay. It’s not about trading cryptos for tens of thousands of dollars in future, instead you’ll use crypto in your day to day life like you use your fiat. 1 ETH will be 1 ETH everytime. Not $1000 today, $1200 tomorrow, $800 day after tomorrow. So always keep a long vision while reviewing your cryptofolio.
We had adopted an appropriate method to track the portfolio performance at MoatFund. The fund is 100% concentrated on Ethereum and ERC20 tokens so Ether is the base currency and benchmark in our ecosystem.
Our portfolio fully reflects the stats compared to Ethereum performance so if an ERC20 token in our portfolio inflates 20% as per fiat ($) and at the same time if Ether inflates 30% as per fiat ($), our portfolio page will show you a loss of 10%. Check out our Portfolio page — https://moatfund.com/portfolio.
Why?
What’s the point of diversifying your Ether if you can’t even beat the performance of Ether. I hope you got my point.
Similarly, if an ERC20 token in the portfolio increased by 40% in fiat terms and at the same time, if ether increased by 25%, — we will only take credit of 15% (40 - 25) increase and that’s what our portfolio page will reflect. It can also turn out other way.
Profit Calculator
In case you want to check comprehensive return of your investment including fiat currency, you can use our Profit Calculator but beware it does not always show profit 😜.
Let’s make some assumptions.
Suppose you invested Rs 65k aggregate to buy 3 Ether, further invested in 12,000 MoatUnits. This is how your portfolio stats will look like.
And Yes! we will surely take the blame of 25% drop in crypto terms without taking the credit of 54% rise in Fiat terms because that’s not brainy. Remember the logic — what’s the point of diversifying the Ether if we can’t even beat the performance of Ether.
But if it goes other way i.e. 25% rise in Crypto terms and 54% drop in fiat. We will only take the credit of 25% without taking the blame of 54% drop in fiat terms because we saved the difference (54 - 25). I hope you understand what I’m trying to point out.
MoatUnit is an ERC20 token which represents many research backed crypto currencies in MoatFund Ecosystem where funds are managed 100% on Ethereum Blockchain with Decentralised Governance, leaving out no chance to scam the system.
