Hurdle Rate Estimation

Hurdle rate estimation is the process of setting the minimum required return that an investment must generate to be considered worthwhile. This rate is usually based on the cost of capital and the level of risk involved.

In crypto, this hurdle rate must be high to reflect the substantial volatility and risk of the projects being invested in. By setting a hurdle rate, an investor ensures that they are only deploying capital in projects that have the potential to deliver truly value-adding returns.

It acts as an objective filter, guiding investment decisions and keeping the focus on profitable, risk-aligned growth.