What is the internal rate of return formula used in cryptocurrency investments?

1 answers

• Joel Lopez MJun 28, 2020 · 5 years ago
  The internal rate of return (IRR) formula is widely used in the cryptocurrency investment industry to assess the potential profitability of investments. It takes into account the initial investment, the expected cash flows, and the time value of money. By calculating the discount rate at which the net present value (NPV) of the investment becomes zero, the IRR formula provides investors with an estimate of the rate of return they can expect to earn. This information is valuable for evaluating the viability of different investment opportunities. However, it's important to note that the IRR formula has its limitations. It assumes that all cash flows are reinvested at the same rate of return, which may not always be realistic in the dynamic cryptocurrency market. Additionally, the formula does not consider external factors such as market volatility or regulatory changes, which can significantly impact investment returns.
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