over 1 year ago • 1 min
If you fancy yourself a bit of a stock picker, you’ve probably used the price-to-earnings (P/E) ratio to gauge whether a stock is cheap or dear to buy. And while crypto projects don’t have earnings per se, some of them do pull in fees from their users. Enter the price-to-fees (P/F) ratio.
The chart shows the top 10 dapps (decentralized applications) ranked by the lowest P/F ratios. At the top spot, you have DeFi project Convex Finance (token CVX), with a value of just 2.7x. See, Convex’s users can stake different tokens to earn a yield on their crypto, but they pay small fees on the blockchain each time they do that. Those fees are then divided up by the total number of CVX tokens to get the fees per token – kind of like how the P/E takes the earnings per share instead of the total earnings of a company. The actual price is then divided by the fees per token to get the P/F.
A lower ratio suggests a project might be trading at a bargain relative to the amount of fees it’s raking in. And while the P/F can be a handy tool to help you compare apples with apples in crypto, you’d be unwise to use it all on its own. Just like the P/E for stocks, you're better off using it as part of your research, rather than as a buy or sell signal.
If you want to keep an eye on the ratios yourself, here’s where to find them.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.