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What's a Fair Value for Crypto Networks Like BTC, ETH and SOL? - Ep. 721
Unchained
Understand Value: Treat Bitcoin like Gold, Analyze Others like Companies
Valuing networks such as Bitcoin and Ethereum requires different analytical approaches. Bitcoin, being a proof-of-work asset, functions more as a commodity or store of value, similar to gold, thus presenting an inherently negative cash flow when viewed through traditional income statements. The essence of its value comes from understanding economic flows and ensuring sustainable miner compensation through network usage costs. Conversely, other networks, particularly those like Ethereum, exhibit characteristics akin to equity, where an income-based analysis can be applied. These networks involve predictable revenues and costs, leading to a potential net profit for token holders that allows for standard valuation methods, including applying multiples to projected earnings. In the middle ground, Ethereum illustrates a blend of both; it generates revenue while maintaining elements of both commodity and equity, potentially rewarding holders through mechanisms like token burns that resemble share buybacks.
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