How to think about crypto P/E (Lite)

Learn the practical application of price-to-earnings ratios for cryptoassets

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Dear Crypto Natives,

I recently tweeted this:

I think many cryptoassets have a big problem.

They’re being priced as if they’ll accrue a monetary premium, yet their investors and creators claim the assets themselves aren’t trying to be a money. But if these same assets are valued based on future earnings—say, the future transaction fees they’ll produce—they’d probably be worth low millions, not the hundreds of millions and billions that people are paying for them.

Is there are way to see this more clearly?

What if we stripped these assets of their monetary premium and looked at them based on future earnings alone? That’s what we’ll learn to do in today’s tactic. We’re going to level up on crypto P/E.

One more thing—don’t get caught up on the precise numbers in the P/E ratios today—the calculations here are an early attempt. This is more about having a framework for thinking about the cryptoasset valuation so you can avoid the lemons and double-down on the winners.



Tactic #18:
How to think about crypto P/E

Price-to-earnings (P/E) ratios have proven a useful way to compare the value of capital assets like stocks and rental properties. Can we use this metric for cryptoassets? I think we can—for certain types.

Today we’re going to walk-through some crypto P/E metrics put together by Mika Honkasalo and how they might apply to different types of assets.

  • Goal: Learn a model for thinking about the P/E of cryptoassets

  • Skill: Intermediate

  • Effort: Spend 30 mins reading this article and reviewing the metrics

  • ROI: Avoid overpriced cryptoassets that don’t reflect strong fundamentals

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Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.

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