For tax purposes, your basis is what you paid.

For investment tracking purposes, your initial value is whatever it is worth at the beginning of the measurement period. So if you're trying to calculate 2021 YTD returns, then you'd start with whatever the value was on 1/1/2021.

And yes, if the shares have dropped in value since 1/1/2021, then that will have a negative impact on your annual performance for 2021. (How could it be otherwise?) The size of the negative impact will of course depend on the price per share decline in value and how big of a position this stock is relative to your overall portfolio.

Read up on XIRR() by the way, and be sure to account for dividends, and additions to and distributions from the portfolio to get an accurate answer.