ROI (Return on Investment) measures the gain or loss generated on an investment relative to the amount of money invested. It's expressed as a percentage and is one of the simplest ways to evaluate investment performance.
Formula
ROI = ((Current Value - Cost) / Cost) × 100
If you invested $1,000 and your position is now worth $3,000: ROI = (($3,000 - $1,000) / $1,000) × 100 = 200%
ROI in Crypto
Crypto is known for extreme ROI potential in both directions. Early Bitcoin investors saw ROIs of millions of percent, while many altcoin investors have experienced -90% or worse. Time horizon matters enormously — the same asset can show +500% ROI over 5 years but -50% over 3 months.
Limitations
ROI doesn't account for time (a 100% return in 1 month is vastly different from 100% over 5 years), risk, or opportunity cost. For more complete analysis, consider metrics like risk-adjusted returns (Sharpe ratio) and compare against benchmarks like Bitcoin or the total crypto market.