Tracking and assessing crypto portfolio performance is essential for investors who want to maximize gains, minimize risk, and stay aligned with their investment goals. But how do you measure success? Which metrics matter most? And how can you efficiently monitor your portfolio’s health over time?
Let’s break down some of the key performance metrics that professional investors use, take a look at how to perform an assessment, and introduce some tools that can help you stay on top of your portfolio.
Key Metrics to Assess Crypto Portfolio Performance
These are some, but not all, of the metrics that can help you determine how your portfolio is performing.
1. Total Portfolio Value
The most basic metric, your total portfolio value is exactly as it sounds: the total value of your crypto holdings in fiat currency (USD, EUR, etc.) or another reference asset (BTC, ETH). Use this metric by tracking your portfolio value over time and ensuring it aligns with your financial goals.
2. Profit & Loss (P&L)
Your P&L helps determine whether your investments are in the green (profitable) or in the red (losing value). To calculate your P&L, you simply subtract your initial investment from the current portfolio value. To use this metric effectively, regularly check in to understand how much you’ve gained or lost since starting your investments.
3. Return on Investment (ROI)
ROI measures the percentage of returns you’ve made on your investments. You can compare the ROI of different assets in your portfolio to see which are performing the best and make new decisions about your diversification from there.
How to calculate ROI:
ROI (%) = [(Current Value - Initial Investment) / Initial Investment] x 100
4. Sharpe Ratio (Risk-Adjusted Returns)
Your Sharpe Ratio helps assess your portfolio performance relative to its risk. In a way, it determines if your success in investing is too good to be true or is due to luck rather than investing skills. A higher Sharpe Ratio indicates better risk-adjusted returns. If it’s low, you may want to rebalance to adjust for risk and volatility!
How to calculate your Sharpe Ratio:
Sharpe Ratio = (Portfolio Return - Risk-Free Rate) / Standard Deviation of the Excess Return
5. Volatility & Drawdown
Volatility measures how much your portfolio value fluctuates. Drawdown calculates the percentage decline from a peak to the lowest point before recovering, meaning you’re losing lots before (or if) it recovers. Investors use volatility and drawdown calculations to determine how risky an asset is. With extreme drawdowns, they may decide to diversify or adjust their risk exposure to that particular asset.
6. Crypto Allocation & Diversification
A balanced crypto portfolio prevents overexposure to a single asset. Tracking allocation percentages helps maintain diversification and can reduce your exposure to volatility. If you’ve determined that your allocations have moved away from your original strategy due to market movements, you can simply rebalance to push your portfolio back into your comfort zone.
How to Assess Crypto Portfolio Performance
At its most basic, you can assess your portfolio in five steps. It’s important to note that there is nuance within every investor’s strategy and decision-making process once the assessment is complete! Some will perform more through assessments than others by using different tools and strategies.
Step 1: Track Your Portfolio Regularly
Use a crypto portfolio tracker like 3Balance, DeBank, or CoinStats to monitor real-time data on performance, allocation, and market movements.
Step 2: Compare Performance to Market Benchmarks
Check how your portfolio performs compared to BTC, ETH, or the total crypto market cap. If your returns are lagging, it might be time to adjust your strategy.
Step 3: Identify Underperforming & Overperforming Assets
For underperforming assets, consider whether to hold, sell, or rebalance based on market conditions. With overperforming assets, decide if you want to take profits or let them ride.
Step 4: Adjust Based on Risk & Market Conditions
If your portfolio is too risky, shift towards more stable assets. If you’re too concentrated, consider diversifying with DeFi tokens, Layer 1s, or altcoins. Remember to always do your own research before choosing new assets.
Step 5: Rebalance if Needed
Rebalancing helps maintain your original crypto portfolio strategy by selling assets that have grown too large and buying underrepresented ones. 3Balance automates this process, making it easier to keep your portfolio aligned.
Ready To Assess Your Crypto Portfolio Performance?
Assessing crypto portfolio performance isn’t just about tracking profits and losses—it’s about making data-driven decisions to improve your investment strategy. Regular tracking and performance evaluation keeps you informed, while key metrics like ROI, volatility, and allocation help you optimize your portfolio. Finally, rebalancing and risk management strategies help ensure your portfolio's long-term sustainability and profitability.
As always, this is not financial advice, and everyone should do their own research before making decisions and investing.
