Came across this interesting snapshot on twitter. It was looking at the Revenue Multiples of some of the top Chains
Revenue Multiple is a valuation metric normally used to value companies where profitability may be negative or volatile. The Revenue Multiple acts as a benchmark for comparing valuations against peers. This valuation metric reflects what investors are willing to pay for each dollar of performance regardless of current earnings.
Used in the software and technology sectors.
Formula
Market Cap divided by TTM (Trailing Twelve Month) Revenue = Revenue Multiple
How the Cryptos RM stacks up
- ETH - 5100x
- BNB - 4600x
- SOL - 2498x
- HYPE - 1836x
- AVAX - 1177x
- ARB - 134x
- TRON - 91x
- POL - 43x
Example of crypto investors willingness to pay
- Ethereum chain revenue was $64.03M for TTM. And is valued at $326B
- while TRON chain revenue was $349M for TTM. And is valued at $32B.
Despite TRON having 6x Ethereum’s chain revenue, TRON’s valuation (market cap) is 10x lower relative to Ethereum’s. Or put another way TRON’s revenue multiple is 56x lower relative to Ethereum’s.
Why the difference?
- Decentralization discount - Ethereum chain is considered sufficiently decentralized for large scale applications. While TRON chain is run by 27 elected block producers closely tied to Justin Sun. AKA the “Justin Sun crypto credibility discount”
- Knowledge gap - it has been hard to a feal value on crypto (digital) assets. Are they quasi-securities or are they commodities? The value has been made up from the shared belief of multiple HODLers about Ethereum’s “intrinsic” value. Note: “intrinsic” is just a word and it has been used in the context of a shared belief. But if you can’t help yourself fell free to discuss in the comments
- Past cycle drag - 2021 was an anomaly with the COVID’s cheap liquidity raising all boats. Crypto is gong through it’s “Great Cleanse”(AKA “collared-shirt era” @GuyWuollet). Distinguishing utility-driven projects from speculative hype. Note: Justin Sun is the crypto master of hype.
Big tech comparisons
- SpaceX - 94x
- NVIDIA - 18x
- Meta - 8.1x
- Amazon - 3.5x
It seems that crypto valuations are not currently bound by the arithmetic that is used for the valuations of the world’s top tech companies.
Quote of the day
”No altcoin is worth its price today—but the good ones will be worth so much in the future, today’s price won’t matter.” @MarkHelfham - Crypto is Easy
🤞🙏🤞🙏🤞🙏
DISCLAIMER: I promise no AI was harmed in the researching, editing and publishing of this (as much as I might have wanted to). But lots of CO2 was produced, doing my bit to make planet earth green.
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