I would like to share my methods for measuring return from different investments. Previous post on the same topic was oriented on p2p lending. Today I like to simplyfy explanation using examples from crypto.
Disclaimer: that is not an investment advise. All mentioned numbers are used only for an illustration. Do your own research and never invest into new initiatives more than you can afford to lose.
Lets start from something simple. Staking and masternodes are new hot topic. Last month I got interests in 4 new projects. I have tried to evaluate Team, Community, Plans, Idea, Initial setup, Price movements, hidden rumours and players. When I do full analysis, I wish to understand profitability of possible investment, too.
Why that is not so simple like asking somebody in the forum or look on coin website?
Different project use different meanings when speak about return. Sometimes project teams mix return and ROI, almost any project is counting compound interest (an interest from the received and left for staking awards), almost nobody speak what will happens if price of coin will change or what will be, if number of stakers will significantly change.
When we compare different projects, we need to work with stable and always comparable metrics.
After we invested, we need to continuously measure performance and react to changes in profitability.
For profitability measurement I use Excel XIRR formula. It works for all projects and works in very simple way. You fill in excel/libre/openoffice
- date of investment and invested amount with negative sign,
- dates of all additional deposits with negative sign,
- dates of all withdraws as positive amount,
- at the end you write today’s date (or future date X) and value of portfolio on that date (amount of coins you have today or plan to have on date X).
XIRR formula will show you return rate from project. XIRR is respecting all dates and deposited/withdraw amounts. More about IRR method you can read there .
Lets take a first example. If I am interested in project KORE and I question is it good or bad idea to setup a KORE masternode. I can get from whitepaper, that to setup MN I need 500KORE and my weekly return will be 3.0163 coin (can get such info from masternodes.online or from bitcointalks discussions).
I do simple spreadsheet and calculate XIRR
In case of KORE I am getting potential return 36.84%. That looks quite good for an established mature project (just my opinion, DYOR all risk factors).
First time I read about Kalkulus in 21cryptos magazine. I have tried to find more information about Team, Idea, Plans, etc. At some point I got my first KLKS coins. I had a plan to HODL this coins and slowly stake, but few weeks later there was big drop in price. I got interested in idea to setup a masternode.
I have joined their discord, I saw community, I saw how developers communicate and what they do. I found that at that moment project had about 140 masternodes and I may get several rewards per day totalling about 82 KLKS daily. For a MN I need 20.000KLKS.
That how my initial excel may look.
Return looks quite interesting. I try to get more information about a future of this project. In meantime I accumulated more coins. All purchased coins I send into wallet for staking (staking is a simple HOLDING coins in an open wallet). At some day I have enough coins to setup KLKS MN.
That day my excel looks looks like this:
During a week of accumulation my wallet produced several staking rewards, each over 6.7KLKS. I bought 23.056KLKS and received in staking rewards 472KLKS. I have 23.529coins and my return rate is 798%. Till now, that is perfect.
In that situation I start to threat KLKS as my a longer term investmentsproject. For me that means, that I do not plan to exit within next several month (or years) or till plan goes 5-10-20x. For long term projects I add into my Excel a History Area. There I will save information about coin performance on different dates. Later I will be able to make charts or see monthly profit etc. At start I monitor performance almost every day, later weekly and later once a month.
22nd of April I have settled a Masternode. Process is simple, well documented and fast. Next day I start to get first rewards. At the same time, my wallet is open and staking all received rewards and several coins (approx 3000KLKS) that remain in wallet after setup of masternode.
Today my excel on KLKS project looks that:
Next day after setting MN, return went down. That is normal as MN need some time to get matured. Also, I did some regrouping inside the wallet. Now MN rewards are coming stable and return is going up. I plan that in longer run return counted in KLKS will grow over 500%.
If you like to learn more about this project, their discord is https://discord.gg/kVrQch9 and more about project is available on coingecko https://www.coingecko.com/en/coins/kalkulus . Always DYOR.
I said – I plan to see return counted in KLKS over 500%. Why it is counted in KLKS? Because to buy KLKS I have used my BTC or fiat. I like to have profit in BTC or fiat also. Price of KLKS may stay stable like now, may drop and may grow twice or 5x or 10x. To see a possible impact, lets look on next example.
A very very fresh project AdultChain. They declare that they will combine adult content and crypto. In theory that is very interesting combination. Discord https://discord.gg/YMt3Gds . Web adultchain.xxx
Project is very fresh and risks are really big. Sometimes I think if that is good that I use this coins in examples 🙂 From another side, you will always will see huge risks and huge profit possibilities in many very fresh projects. So, look on numbers not on names.
For 1 MN I need 20.000XXX and each reward from MN is 75coins. At the very beginning there were only 90 MN and reward was coming every 2hours. That was making 12 x 75 = 900coins per day. Excel was crazy, Excel was not able to calculate so huge return. But in few days amount of masternodes went to 250+ and rewards start to arrive with much longer delay. Owners of MN start to get only 6 rewards daily. Return is still amazing, but if project goes well, then number of masternodes will grow and return will decrease. In long term a return will come closer to some market median.
First adopter always takes bigger risk, but may win more. AGAIN, that is not an advertisement, that is example, and look below, that is not a full example.
On day of release XXX coin was priced about 1000 satoshi. Week later price went to average 800 and later stay stable about 600satoshi. Means if you paid for your MN 0.2BTC on day 1, week later your masternode cost only about 0.16BTC or less.
What is good – we can do XIRR calculations in BTC or USD. Excel will look like this
First line: we invested 0.2BTC and got 20.000XXX coins, first day staking reward was amazing, then it stay amazing but a bit lower, then more masternodes and daily rewards went lower again. Per week we got 2925XXX. XIRR in XXX is so big, that excel cannot show it.
Opposite if you measure in BTC, we are in loss. Situation will become more positive, if price of XXX will start to grow or after few weeks when we will stake missing coins to achieve a breakeven. After that we may become super rich again 🙂 But if price will drop more, we will stay longer in loss zone. Time will show, project is only 2 weeks old.
Final notes. In most cases, I have 3 or 4 columns for return monitoring. I monitor return in coins (to see if all rewards are coming fine), I count return in BTC. Often I can count discounted return, when I lower BTC price of current portfolio by 20-30% (assuming price of coin goes down 20-30%).
Zipped Excel spreadsheet with example : xiir-sample-crypto
If you got interest in staking and masternodes, I wound strongly recommend you to read an article from @cryptocartel https://medium.com/@thecryptocartel/my-masternode-journey-cryptocartel-77cb4b7334df . There you can find not only basic information about terms, but also advise on different strategies used with masternodes. If you think to start with something like that – I always recommend first to buy with simple PoS staking and discord/telegram reading, not with a n MN at day or week one.
Extended disclaimer: that is not an investment advise. All mentioned numbers are used just for an illustration. Do your own research and never invest into new initiatives more than you can afford to lose. That is very possible that you read this post several weeks or month after it is produced and some of mentioned coins do not exist or dumped. That is also possible that mentioned coins are still fine or grow in price. All that will make market situation different and mentioned return numbers will not reflect your current situation.
Have a nice reading, and will be happy to see your comments!