tl;dr: a new crop of financial ratings firms is emerging in the crypto industry. A sign of maturation.

There are traditional finance metrics like EPS, EBITDA, etc. for assessing the value of traditional organizations.

Then, there are crypto-native financial metrics to assess decentralized networks.

Since the beginning of my interest in crypto, people have been trying to figure out ways to value these emerging protocols and dApps. It’s clear that the metrics for industrial era companies are not 100% applicable.

Valuing Crypto Assets, Take 1

Back in September 2017, “How to Value Crypto Assets” was one of the first posts on the topic. We touched on Crypto Asset Valuations  and “the Crypto J-Curve”.

Later, we reviewed  Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond in the post Value and Measurement in a Digital World.

What was clear in all of these was that simple metrics, such as “market cap” of tokens*price were not sufficient.

Valuing Crypto Assets, Take 2

Since then, the industry has matured considerably and we are seeing the emergence of serious, professional-driven services that provide thoughtful, “crypto-native’ metrics to help investors get a handle on the inner workings of these new business models.

The two with which I have been most impressed are Messari and Bitcoin Market Journal.

Whether their particular brand of crypto-native metrics are the “right” ones or not, I don’t know, but I like the way they are approaching it.

For example, Bitcoin Market Journal offers three formulas they calculate: NVM Ratio, NVT Ratio, and Token Velocity. 

Messari offers data on “liquid marketcap” as well as “proof of stake ranking” to help maximize yields.

Both of these sites are led by well-respected industry veterans. Messari is led by Ryan Selkis and BMJ has Mati Greenspan.. Mati also writes the solid Quantum Economics newsletter.

Both of them have thought a long time about how to value new digital/crypto assets.

Why This Matters

While I geeked out on things like the NVM ratio, I think the larger message for me is that this is a further sign of industry maturation.

If there isn’t a market of traders and investors large enough to sustain research firms, they won’t emerge.

Yet, Messari and BMJ are here and growing (from what I can see).

The best part is that this is part of the flywheel…the better the research, the more willing other investors are to participate.

The more investors, the better the research sites will become.

And so on.

Research sites may be “picks and shovels” but the existence of “picks and shovels” merchants means there is demand.