Many people asked about the values displayed as ROI on Fliphodl: How are they calculated? Why are they sometimes different from the other websites/telegram bots like ICODrops, TokenStats or CryptoWhale? How accurate are they? If you are a crypto investor, you need to know what follows.
What means ROI
ROI is the acronym for Return On Investment. The ROI value tells you how profitable was your investment by comparing your net profit with your bags, basically. Investopedia defines it like this: “Return on Investment (ROI) is a performance measure, used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments”. There is 2 common ways to traditionally calculate the ROI.
Way #1: ROI = (Total Gain – Invested) / Invested
Way #2: ROI = (Total Gain – Invested) / Total Gain
The first way gives you the net profit compared to the money you had before investing, the second way gives you the net profit compared to the money you have right now (usually, after you sold). Note that the numbers obtained are most likely to be displayed in percentages for handy reading. The first case, which emphasizes on the starting point, is more suited for a ROI indication than the second one, which emphasizes on the ending point and is more suited for generic (and maybe shorter term) percentage changes. So, let’s say that you bought 100 000 OCN tokens during Odyssey’s ICO. Each token is worth 0.0125, so you invested 1 250$. Today you sold all your OCN at 0.0156$/token. You have now 1560$. One can say that you did +24.8% ROI or one can say that your ROI on your current stack is 19.9%, which is not a bad ROI for a short/mid term trade, but usually weak for an ICO investment.
ROI and cryptocurrencies
Due to the bubblesque nature of cryptomarkets, it is not rare to see multiple hundreds percents of increase. Mainly because of this and also a bit the cool factor, token’s ROI are now commonly displayed as coefficients. We obtain the right number by simplifying the equation.
Way #3: ROI = Total Gain / Invested
This way, rather than 0% or 100%, 1 is the reference value. If you invested 10 000$ in EOS when it was 1$ and you sold when it was at 10$, you now have 100 000$, which is a nice x10 ROI. If you bought Monetha during the ICO (0.1945$) and you sold now (0.0758$), you did x0.39, which basically means that your bag is now 39% of what it was before you invested. Maybe you noticed that it is not really a real old school ROI anymore, since we took away the “net profit” variable. But at the end of the day, what we need is a relevant and easy to read reference, and gross profits fit nicely when you are in the Flip or Hodl game.
ROI after an ICO (or “ROI since ICO”)
The difference between a basic trade and an ICO investment is that trades ROI are easy to calculate. The starting point is the price when you buy and the ending point is the price when you sell. It is way harder to find the starting point of an ICO (better known as “ICO Price”) for multiple reasons:
- There are always multiple investment rounds with different prices and bonuses for each.
- Investment rounds also fall into two main categories (private and public), each having its own buying and selling restrictions.
- Investment rounds don’t happen at the same time and often have various and/or stupid duration, which can lead to huge conversion (and, thus, token price) variations among buyers.
In order to find the real performance of this kind of asset, we need to focus on the overall metrics by comparing the current price of the token to the average ICO Price. This way, we standardize the calculation by reducing it to only one starting and one ending points. No need to calculate different rates or bonuses, everything is mixed so we actually know how much the project got for each of the emitted tokens. Would you have had a better or worse deal, your performance should be close to the averaged ROI since ICO most of the time.
ICO Price = Money Raised / Token Sold
ROI since ICO = Price Now / ICO Price
Despite how practical it is, the Money/Tokens way of calculating the ICO Price (widely used now) isn’t without issues. If the majority of buyers got a high price while a minority got a significant number of token for half the price or less, do we still have a realistic averaged starting point for the common investor? Then, how far do we go when including private sales? Do we count VCs? ETH did x2 during the crowdsale, how do we determine the money raised? What if there is no crowdsale? What if it was an airdrop? What if available information is unclear or contradictory (yeah, it happens a lot)?
To determine the real ICO price for every cryptoproject is a mess. That is why we review all of them one by one to know exactly how much they raised and how much they sold by going on the project’s social media (Twitter, Medium, Reddit, Telegram, …) and by comparing our numbers with the work of our bros (Coinmarketcap, Icodrops, TokenMarket, …). Here are some rules we apply to to keep coherent results:
- We consider the crowdsale end date as being the date of the last token sold, which is usually the last day of the ICO. Sometimes the crowdsale does not occur and we have to look for initial airdrops or the last presale.
- Money Raised: We do the conversion “Total Cryptos Raised -> $ USD” with the crowdsale end date conversion rates, assuming that the team is not going to cash out before the end of the ICO.
- Token Sold: Every token sold is taken into consideration. We tend to include airdrops when they are part of the ICO / when it makes sense.
Sometimes ICO metrics are clearly summarized in a Medium post, sometimes you have to dig the internet or talk to some representatives. For the few cases where things are way too shady, we just don’t add the token. Most of the time, our numbers correlate with what is shown here and there, but due to the issues mentioned above, sometimes they don’t. A good example is Zilliqa. The presale went well and the communication about the numbers was perfectly transparent. Unfortunately, when they locked up the price of ETH to set their marketcap in $USD (which is dumb to say, you can’t “lock up” ETH price, see what is following), they didn’t expect that ETH price would go x3 during the last community round. It is fucked up because there is a blurry ending point somewhere between 450$ and 1300$ per ETH, which is quite random to determine a realistic conversion: they most probably cashed out way more than the 22M$ announced, since it is indexed to the lowest (450$), but the community who contributed during this period got a pretty bad ZIL/USD ratio compared to “the norm”. To get to this norm, we had to select as the ending point the 30th of November, which is the day right after the end of the eligibility and also the day when ETH is around 450$.
Another good and actually more relevant example about how fucked up things can be and how easy it is to find false information on the internet: THEKEY. THEYKEY conducted their ICO through end of 2017 to beginning of 2018. All their goals and directives were pretty clear: 22 M$ funding with 10 000 M total TKY token supply, 51% being delivered during the ICO. When you do the maths, the price per token is far from what is proposed on Icodrops for many reasons. Firstly, the number of TKY you could have depended heavily on your tier: Private presale was about 2 M tokens for 1 BTC, public presale was about 1.25 M for 1 BTC and the crowdsalers got only 400 000 TKY for 1 BTC. Secondly, the market was a real rollercoaster during this period and most base currencies (BTC, ETH, NEO, …) did x3, making it very hard for everyone to evaluate anything. At the end of this journey, the only method available to get things right was to rely the final numbers: How much has been raised in total, how much has been sold in total and what is the ending date. It appears, if we refer to the official posts from the team, that unlike stated on almost all ICO websites, THEKEY didn’t raised 22 M$ but 36 M$. Also, they didn’t sell 51% of their supply as expected, but rather 37.1%. The average ICO price per token is consequently far below what is shown on Icodrops and probably more accurate for early than for late investors.
To find the right ICO price and the right ROI is not an easy task since ICOs got trendy, but Fliphodl does its best to get the most relevant values. However, it is yours to choose, as an investor, whether you want to get the most out of your token or not. Being a laste investor (crowdsale) is less risky because you can better evaluate the hype and seriousness around a project, but, on the other hand, you will sometimes find out that you pay way too much above the average ICO price. Yes, the ROI Since ICO will not always be perfectly accurate compared to your situation, but it will still be a good metric about the quality of your investment: get those presale spots!
While you can access to the full Token Market here, Fliphodl has a badass bot on Telegram that gives you real the time price and ROI for any listed token. Come say hi and feel free to give your opinion. If you see any mistake you can also send us a message here.