Bitcoin, Ethereum or Dogecoin. What attracted you to the asset? What made you buy in? Over the past years, if you assume that someone bought a crypto thinking they were about to become overnight millionaires, it’s a fallacy. Every investor needs to look at the valuation and, more importantly, the problem a particular coin is solving, and if that can disrupt a sector in the coming years. A common misconception in the cryptocurrency market is that there is no way to value a coin. In this article, we can see how traditional markets’ valuation metrics apply to crypto markets, a few crypto valuation metrics you can apply, and how valuation metrics of the crypto markets are more efficient than those of traditional markets.
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View Details »What is valuation? Valuation is the process of determining the true worth of an asset. This can be the worth of an asset relative to a particular financial metric such as revenue, profit or book value. Further, it can be the worth of an asset relative to the industry or competitors. These metrics are measured against the price of a publicly listed share to measure if the company concerned is overvalued or undervalued. In the traditional stock market, the three most used valuation metrics are:
Price to sales ratio: Stock price to the revenue earned per share of the company Price to earnings ratio: Stock price to the profit earned per share of the company Price to book value: Stock price to the book value of shareholder’s equityDoes valuation exist in crypto markets? In order to measure the valuation of a stock, one needs the revenue and profit of a company.
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