Compound Annual Growth Rate

The Compound Annual Growth Rate (CAGR) is a measure used to determine the mean annual growth rate of an investment over a period longer than one year. It provides a smoothed view of performance, assuming that the investment grew at a steady rate, which is rarely the case in the volatile crypto market.

Despite its limitations, CAGR is a useful tool for comparing the long-term performance of different assets or strategies, allowing investors to normalize returns across varying timeframes. In crypto, it helps in evaluating the effectiveness of staking or yield-generating strategies by accounting for the effects of compounding over time.

While it does not capture the volatility or the path taken to reach the final value, it serves as a baseline metric for assessing the growth potential of an investment strategy relative to its risks and the broader market benchmarks.