While the P/E ratio is a great starting point for cryptoasset valuation, it should not be used in isolation.
- What's driving 'E'? Token incentives / organic adoption?
- What does the rev. composition look like? One or multiple sources?
- Is the revenue share % sustainable?
- The rise of @AxieInfinity is clearly visible
- Also the rapid emergence of @PancakeSwap
- @synthetix_io relative share has gone down (launch on Optimism might reverse this?)
3/ Looking at the Total Revenue (supply-side + protocol) dashboard:
- @ethereum's share of total fees has gone down
- Even here, @AxieInfinity's recent growth is clearly visible
- We can also see that even @binance smart chain has to charge its users meaningful tx fees 😄
2/ The 'E' in the P/E ratio will initially be based on protocol revenue, i.e. money generated from the protocol’s business & subsequently allocated to its treasury or distributed to its token holders.
*In the beginning, the P/E ratio won't take into account a protocol's costs.
3/ How should I use the P/S and P/E ratios when analyzing a protocol?
We’ll go through 3 different scenarios, which highlight the possible revenue distributions of a protocol, and how the distribution affects the two ratios.
• Protocol revenue chart shows you which protocols are generating money for their token holders.
• With the toggle, you'll get similar charts for Total Revenue & Price to sales ratio.
• The customisable data table lets you choose metrics & sort the results.
1/ Why the price to sales ratio (P/S) is a useful tool for crypto investors 👇
The price to sales ratio compares a protocol’s market cap to its revenues. A low ratio could imply that the protocol is undervalued and vice versa.
2/ The P/S ratio is an ideal valuation method for early-stage protocols, which often have little or no net income.
Instead, the P/S ratio focuses on the usage of a protocol, by tracking the total fees paid (revenue) by the users of its service. More info: tokenterminal.com/faq
3/ We’re in a historically unique position, with early-stage & high-growth startups operating transparently on-chain.
This transparency makes it possible to find protocols with high usage relative to market cap.