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> Basically what's missing is the ability to even guess at the "true" value of cryptocurrency. There's no P/E ratios to consider because the only thing Crypto "
by aqme28 5y ago
> Basically what's missing is the ability to even guess at the "true" value of cryptocurrency. There's no P/E ratios to consider because the only thing Crypto "produces" is Crypto transactions. It's also impossible to even guess at a floor or ceiling for the price of a cryptocurrency. The only thing that determines their price is human sentiment - a very fickle input.
Interestingly, this isn't really true anymore. Most of the newer defi currencies represent a portion of ownership in some protocol that is actually returning profits.
E.g. Maker is a lending platform for DAI. You can borrow DAI by depositing other currencies as collateral. The interest you pay to borrow is then converted by Maker into a sort of "stock buyback" against its Maker token.
The Maker token has a P/E ratio, as do many other coins. https://www.tokenterminal.com/ https://www.tokenterminal.com/
To your point though, the P/E ratio for most of these is denominated in other cryptocurrencies, not in USD.
- meragrin_ 5y ago> ownership in some protocol But what is the value of the protocol? > actually returning profits Are there actually profits if the protocol is worthless?
- aqme28 5y ago>But what is the value of the protocol? Wish I knew! Investing would be a lot easier. > Are there actually profits if the protocol is worthless? Nope, therefore these protocols are not worthless?
- throwaway4good 5y agoSure, For example crypto.com offers 12% pa. on your USD account. https://crypto.com/eea/earn https://crypto.com/eea/earn P/E just like normal company ...
- aqme28 5y agoWhat are you talking about? APY on a loan is not P/E.
- throwaway4good 5y agoIt is a return. And it is not loan, it is a "stake". An example of the mumbojumbo obvious fraud that is out there. It has nothing to do with a company making money by producing useful products or services that has actual real world value.
- aqme28 5y agoI mostly agree with you, but how does crypto.com's marketing relate to what I was talking about in the parent comment?
- MisterBastahrd 5y agoWhen you stake, you are using your own money to guarantee that transactions on a network will process successfully. If something happens and they don't, you lose that bag. Staking is just a very stupid loan that you give out without having any real insight into the people who borrowed from you.
- lupire 5y agoThey are saying that financially, P/E on a stock (really, E/P) you buy is the same as APY on a deposit/loan, since both are the return on invested capital, and you can cash out your principal later. Oh course their are subtle details that cause volatility and risk of collpase based on how the company/bank/borrower uses the money you put in.
- DerArzt 5y agoAs a layperson who doesn't know a whole lot about investing, this sounds like a ponzi scheme. The way that I am interpreting this is that if I were to invest in one of these (i.e. Maker) then the returns that I would see are there purely because other people are investing in it. That is close to what most stocks do, but at least with stocks in a company the value is not driven by the mechanism by which it is traded alone, but also by the decisions and profitability that the stocks are backing.
- aqme28 5y ago> The way that I am interpreting this is that if I were to invest in one of these (i.e. Maker) then the returns that I would see are there purely because other people are investing in it. That's the opposite of what I'm saying. The returns are from other people using the platform, not from investors in it. For Maker, using the platform means borrowing. For Uniswap, the returns are from a small % fee on trades. It's exactly analogous to a traditional company.
- lupire 5y agoBut what is the platform used for? Converting energy into human comfort, or just another layer of financial engineering?
- kravens_last 5y ago> But what is the platform used for? Converting energy into human comfort, or just another layer of financial engineering? This is essentially the "problem" at heart of all crypto "currencies". There is no real world use case that imparts human value, apart from its utility as a speculative vehicle to grow wealth. Every new DeFi application is a new layer to lock in current adapters who would've otherwise already cashed out. Crypto as a currency is a concept dead in the water because of the perverse incentives of finding every corner of arbitrage between non distinguishable (and frankly worthless) alt tokens/coins. The entire world of crypto is nothing else but an experiment of how much one could financialize a fully non-regulated, intangible, and imaginary "good" based on nothing but greed.
- selestify 5y ago> Price to earnings (P/E) ratio. Calculated by dividing the fully-diluted market cap with the annualized protocol revenue. Shows how a project is valued in relation to its protocol revenue. That's misleading. Revenue is not earnings. For something like Uniswap, you also have to look at how much of earnings is given to liquidity providers versus spent on token buybacks.
- xadhominemx 5y agoPlus all the revenue is generated from cryptocurrency trading. It’s all circular.