seekingbalance wrote:absolutezero wrote:seekingbalance wrote:
And they are not materially different from many small cap shares I have done well in or not, have gone up massively or have gone bust, and many of them are mega cap behemoths that are bigger than most U.K. companies in size - Etherium is $248bn, Binance is $88bn, Cardano $41bn, Dot is $37bn, Uniswap is $18bn. The 50th biggest project is $2.5bn - solid FTSE 250 territory.
This is interesting.
So how do you decide whether to buy? Or when to sell?
If I was buying small company shares I have PE ratios, dividend yields, audited accounts, debt levels, EBITDA etc.
Do these crypto projects have equivalent numbers?
If so, how do you value them?
If not, how is it investing and not just gambling/speculation?
Good points all. Yes, there are equivalents, with metrics such as token float, staking levels, value of staked coins locked in the protocol, value of transactions on the platform, volume of transaction, volume of customers, volume of active customers, yield on stake, loan levels, collateralisation, utility value of the token, earnings, dilution rate, token burn rate. The code for any project will be audited, many times.
And just like there are a zillion different ways to value a company, these all have different meanings for different people, and arguably don’t mean much anyway. Sure, you can compare PEs - but how do you compare SSE with Scottish Mortgage, Amazon with Tesco, Lloyds with ITM power? You might like dividend yields, but are they real, are they sustainable in a pinch? You can look at CAPE ratios, Tobias Q, PYAD - all are fine until they are not, and arguably are fighting last decades’ war.
There is a huge difference between shares in listed companies and crypto.
It's very easy to compare, say, Tesco with Amazon etc.
They all have earnings (and usually profit). Actual cash they receive for services and goods they produce.
So it's easy to compare one share against another, irrespective of what the company actually does.
The companies are backed by something. Their earnings.
What is crypto backed by? Except what other people think it is worth.
You mention earnings but there are no earnings behind it. Nothing tangible.
Just 'proof of work' which tomorrow may disappear in a puff of smoke as people move on to the next fad.
Like the pound in your pocket, which is backed by no more than a promise to pay you in more pounds in your pocket -except that is backed by the British State.
As you may have gathered, I am a "crypto denier". I just don't see what the fuss is about.