A Price-To-Earnings Ratio For Crypto?

A Price-To-Earnings Ratio For Crypto?
Jonathan Hobbs

over 1 year ago1 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.



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