The comprehensive gain or loss generated on an investment over a specific period, including both capital appreciation (or depreciation) and any income received, such as dividends, interest, or staking rewards. In crypto, it measures the full performance of a digital asset or portfolio.
Mechanism
Total return calculation aggregates all forms of financial gain or loss. This includes the change in an asset’s market price over the holding period, plus any distributions or yields received. For crypto assets, this mechanism accounts for price movements of tokens, staking rewards, lending interest, liquidity provider fees, or airdrops. It provides a holistic view of investment performance, contrasting with metrics that only consider price changes.
Methodology
To compute total return, an investor sums the ending value of the investment, any cash flows received (income), and then subtracts the initial investment value, dividing the result by the initial investment. This methodology offers a more accurate assessment of investment effectiveness than simply observing price fluctuations, especially for yield-generating crypto assets. Analyzing total return allows for comparison across different investment strategies and asset classes, enabling informed portfolio construction and performance evaluation.
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