Metrics are numerical values used by investors to determine whether to purchase, sell, or keep a cryptocurrency. There are now 6,317 cryptos currently being traded on 405 exchanges! This makes it difficult to immediately determine whether a cryptocurrency is worth the investment in, therefore if you’re a committed investor, you need be aware of the following 5 sorts of metrics:
- ROI and Risks
Let us now discuss return on investment (ROI) and risk measures.
Return on Investment (ROI) is a metric that compares the amount of profit made on a cryptocurrency transaction to the capital invested.
ROI is calculated as Profit / Cost.
Cryptocurrency values are infamous for having huge up and down fluctuations. Sharpe ratios and Volatility are two significant crypto risk measures.
The Sharpe Ratio is the average excess return above the risk-free rate for each unit of volatility. We compute the ratio by subtracting the risk-free yield out from average return. This enables us to quantify the earnings associated with risk-taking activities.
The risk-free return on capital is the return on a risk-free investment, such as a Treasury bond. A good Sharpe Ratio indicates that the profits outweigh the risk.
Volatility is a measure of a cryptocurrency’s price swings. If a cryptocurrency is more volatile, its value might be spread out across a wider range. The worth of volatile cryptos may fluctuate dramatically in a short amount of time.
A cryptocurrency with reduced volatility, on the other hand, is more likely to remain steady and prone to fewer fluctuations.
The standard deviation and variance are commonly used to calculate volatility.
- Open-High-Low-Close Prices
OHLC is a sort of bar graph that displays the low, high, open, and closing values of a cryptocurrency over a certain time period – an 60 min, 24 hours, or even 52 weeks. Other pricing indicators include all-time highs (ATH) and all-time lows (ALL) (ATL). As the name implies, ATH is indeed the highest amount ever attained by a cryptocurrency, while ATL is the cheapest.
On May 12, 2021, Ether (ETH) reached an all-time high of Rs. 318,620.83. On October 21, 2015, it reached an all-time low of Rs. 30.74. You also should look at the low and high prices over the previous 24 hours, a week, a month, 3 months, and a year. This information may be found on the Bitcoin price history page.
- Holder Stats
You’ve most likely heard the word “whales.” They are domains that possess more than 1% of a cryptocurrency’s circulating supply.
Among the most significant key metrics for cryptocurrency holders are:
- The total number of distinct addresses that are associated with resources in the system.
- Addresses that were active in the previous 24 hours and 7 days
- Transactions made by the leading addresses in terms of balance
We will discuss supply as well as market capitalization in this section.
- Circulating Supply
This is the total amount of coins/tokens in circulation and in public possession. Generally, the smaller this figure, the larger the prices will be.
For example, the circulated number of Bitcoins (BTC) rises approximately every 10 mins as new Bitcoins are produced with each mined block. SHIBA INU has the greatest circulating supply, with 394,796,000,000,000 SHIB.
- Maximum Supply
This is the total amount of coins/tokens that’ll ever appear in the lifespan of a cryptocurrency.
For example, the highest production of Bitcoin (BTC) is 21 million, but the availability of Ether (ETH) is infinite!
- Total Supply
The amount of coins/tokens which have previously been generated minus the number of coins/tokens that were “burned.”
For instance, for Bitcoin (BTC), the flowing supply reflects the total supply. Binance Coin (BNB) routinely “burns” coins, which helps to keep its price stable.
- Market Capitalisation
The overall market capitalization of a cryptocurrency’s circulating supply. Circulating Supply multiplied by Current Price is Market Capitalisation. Historically, Bitcoin (BTC) has had the greatest market capitalisation, with Ethereum coming in second.
The market capitalization if the max supply was in rotation, or Price multiplied by Max Supply, is known as Fully Diluted Market Capitalisation (FDMC).
If the total supply is unknown or infinite, like with ETH, then FDMC equals the price multiplied by the entire supply. We can’t evaluate the FDMC if the maximum supply and total supply are both infinite.
We’ll discuss volume, speed, and velocity in this section. Volume refers as to how much cryptocurrency was exchanged in a given time frame, such as 24 hours or 7 days. The velocity or speed of a cryptocurrency is determined as the 24-hour quantity divided by the circulating supply and represents the pace at which the cryptocurrency is traded internationally.
Cryptos may be classified into several categories, the most popular of which are medium of exchange, store of value, and utility cryptos. Velocity is a highly helpful measure for these cryptos.
Wrapped cryptos are those that are linked to assets such as commodities, stocks, intellectual properties, and so on. Their velocities may not be particularly meaningful because they are completely reliant on the pegged assets. Dividend-paying cryptos, Governance tokens, and security tokens are all in this category.