When was the last time you have evaluated the strength of your digital asset portfolio beyond just return on investments.
As an investor, you may be familiar with how to evaluate a traditional portfolio’s performance, but what you might not know is what metrics are used to evaluate a digital asset portfolio. Digital assets can not be valued in the same methodologies that traditional assets are, such as price-to-earnings ratios, discounted cash flows or the capital asset pricing model. As bitcoin and other digital assets continue to grow and evolve, the methods in which they are evaluated must grow and evolve with it.
According to CoinDesk, one method to evaluate digital assets is the network value-to-transaction ratio, or NVT ratio. This is calculated by dividing the market-capitalization of a digital asset by the transaction value over a set period of time. NVT ratio mirrors the Price-to-Earnings ratio used in the stock market, but uses ‘Daily Transaction Value’ instead of ‘Earnings Per Share’ to represent a digital asset’s “base utility”. A high NVT ratio may suggest that the digital asset is overvalued, whereas a lower NVT ratio may suggest the asset is undervalued.
The strength of the actual portfolio is not measured just only the return on investment at a particular time, always remember the past performance or data is not the reflection of any future performance.
If you’re having trouble doing the evaluation yourself, or if you’re looking for a more in-depth evaluation, GreatOne, a US-registered entity that focuses on wealth creation and preservation using digital assets, is creating a service known as Comprehensive Portfolio Evaluation (CPE) Platform. The objective is to enable the platform subscribers to construct healthy and balanced portfolios by displaying a set of scores based on the evaluation of their portfolios. The CPE Platform uses both built-in and user-created metrics. These scores provide an objective measure of the extent to which the portfolio has outperformed or underperformed the respective benchmarks, and are displayed in an easy to read manner.
This commentary is provided as general information only and is in no way intended as investment advice, investment research, a research report or a recommendation. Any decision to invest or take any other action with respect to the securities discussed in this commentary may involve risks not discussed herein and such decisions should not be based solely on the information contained in this document.
Statements in this communication may include forward-looking information and/or may be based on various assumptions. The forward-looking statements and other views or opinions expressed herein are made as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated and there is no guarantee that any particular outcome will come to pass. The statements made herein are subject to change at any time. GreatOne disclaims any obligation to update or revise any statements or views expressed herein.
In considering any performance information included in this commentary, it should be noted that past performance is not a guarantee of future results and there can be no assurance that future results will be realized. Some or all of the information provided herein may be or be based on statements of opinion. In addition, certain information provided herein may be based on third-party sources, which information, although believed to be accurate, has not been independently verified. GreatOne and/or certain of its affiliates and/or clients hold and may, in the future, hold a financial interest in securities that are the same as or substantially similar to the securities discussed in this commentary. No claims are made as to the profitability of such financial interests, now, in the past or in the future and GreatOne and/or its clients may sell such financial interests at any time. The information provided herein is not intended to be, nor should it be construed as an offer to sell or a solicitation of any offer to buy any securities. This commentary has not been reviewed or approved by any regulatory authority and has been prepared without regard to the individual financial circumstances or objectives of persons who may receive it. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
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