The value a token brings will determine its valuation instead of simply relying on MC/FDV
We need a valuation method to know whether the project is a good investment or not.
--------------------------
Method 1: Project Treasury Value
A safe project to invest in is one whose Treasury value exceeds its market capitalization.
The exit point will be when the market cap increases to equal the Treasury value.
This shows that the project is not in a state of lack of money.
Or the Treasury is strong enough to absorb selling pressure from the market over time.
In many cases, the Treasury is not necessarily larger than the market capitalization.
Typically, this number will be around 80% of market capitalization, which is a safe enough level.
You can easily track this index at Defillama Treasuries.
---------
Method 2: P/E
P/E means the ratio between the current price of a stock and the profit per share. For crypto, the company's stock = token. And the profit will be the fee generated from the project's product, Dapp.
Typically, the average P/E ratio falls between 20 and 25. Any number below this is considered a good sign.
Although rare, some crypto protocols are profitable (earning more than they spend).
Most have high P/E, but there are exceptions.
However, this index can be manipulated or fluctuate wildly.
@Token Terminal is an ok tool to start looking at protocol profitability data.
Fee Panel will help you check which protocol generates the most fees.
Note that for projects like Uniswap, 100% of the fees go to the Liquidity Provider.
Revenue Panel will display the overall revenue of the entire project.
The Earnings Panel will show profits after expenses, providing a clearer picture.
@DefiLlama 's Fee Panel also provides detailed information about the fees generated by the protocols.
For a comprehensive view, check Expense on Defillama to look at protocol expenses such as salaries, marketing, and development costs.
---------
Method 3: Competitive Advantage
When you think of DEX, what comes to mind first? Definitely Uniswap $UNI .
Speaking of CEX? Of course #Binance $BNB
What about Liquid Staking? Definitely Lido $LDO
But what about SocialFi? Friendtech? Maybe? What if someone said Lens Protocol?
The new fields do not yet have dominant players like the three names mentioned above.
Based on the pain point that the project solves, evaluate the ability to create competition and excel in a category.
In addition, you can check the market share of projects on Dune Analytics.
These three methods are relatively popular and successful when applied in the stock market.
Sometimes you can ignore all three to speculate on "ponzinomics" projects when you see the potential for great profits.
Applying all three won't make you money right away. But in the long run, I think it will.
