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Author: Admin | 2025-04-28
Ratio provides a simplistic yet practical measure for a quick evaluation of the stock price.Overall, the P/E model does not work in the realm of cryptocurrency. Unlike companies, most blockchain projects do not have earnings. Although it should be noted, that airdrops (e.g. Ether token holders in the ICO craze) and forked tokens (e.g. Bitcoin Cash, Bitcoin Gold and Bitcoin Diamond etc for Bitcoin holders in the hard fork hysteria) can be seen as dividends to token holders. But this type of earnings is neither predictable nor sustainable.Researchers suggested transaction fees as a proxy for the earnings. Using transaction fees as a substitute is misleading, because these fees are earned by miners/blockmakers and not by token holders.Furthermore, using transaction fees could lead to ludicrous results. To illustrate: higher transaction fees lead to a lower P/E ratio and, consequently, to an undervaluation of the token. In other words, Bitcoin becomes undervalued (with decreasing P/E ratio) when transaction fees skyrocket. It is no secret that high transaction fees impede a more universal adoption of Bitcoin.The figure below on the left demonstrates the P/E ratio of Bitcoin over the past five years, using transaction fees as the proxy of Bitcoin earnings. If newly minted Bitcoins (block rewards) are taken into account, the P/E ratio is in the range of 5–125 (see the figure below on the right). Again, it is important to bear in mind that the P/E ratio is meaningless to Bitcoin buyers and sellers, since transaction fees and block rewards are
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