Sector valuation report - Mature

6-step strategy to assess crypto growth: Finding sector trends in innovation cycle

Valuing crypto assets relies on accurately forecasting growth, and monitoring project specific data is crucial to this. We have identified five essential project-specific information and data to track.

Open decentralised platforms are unique in the amount of data freely available to all. If anything, the sheer quantity of the data available poses the challenge, and it might be more efficient and economical to use service providers that streamline the onchain data.

Onchain data provide insight into the existing growth trends and serve as proof points and verification of prior growth assumptions. The data can be tracked on the project level as well as aggregated to monitor sector trends.

The most important project specific information and data to track are

  • User growth (transaction volume, transaction count, number of active users, etc.)
  • Revenues earned by the protocol
  • The share of revenues that are channelled to cover costs in some way (for example, paying liquidity providers, adding to a safety reserve to support the protocol, directing it towards the project treasury or a specific development budget)
  • Holding and flows in and out of project treasuries
  • Token issuance, burn, vesting, distribution as incentives

Below is an example of project specific onchain data.

INCOME STATEMENT — AAVE

It is important to remember that often the protocols charge fees in cryptocurrencies (e.g. transaction fees on blockchains). Many other growth metrics (e.g. the volume of tokens locked in a staking protocol) are also measured in cryptocurrency. During crypto bear markets, the translation into fiat may disguise real growth and make it appear muted. To observe the underlying growth trends, we need to strip away the translation effects from the data.

For long term forecasts, it is reasonable to assume that a protocol’s success will translate into an appreciation of the price of its token, and this should be reflected in fiat currency-based forecasts.

Fabian Dori Quote

Disclaimer

This document is purely for educational purposes and has been issued by Sygnum Group. It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a marketing communication. It does not constitute an offer or a recommendation to subscribe, purchase, sell or hold any security or financial instrument. It contains the opinions of Sygnum Group, as at the date of issue. These opinions and the information contained herein do not take into account an individual‘s specific circumstances, objectives, or needs. No representation is made that any investment or strategy is suitable or appropriate to individual circumstances or that any investment or strategy constitutes personalized investment advice to any investor. Therefore, you must verify the above and all other information provided in the document or otherwise review it with your external advisors. Some investment products and services, including custody, may be subject to legal restrictions or may not be available worldwide on an unrestricted basis. The information and analysis contained herein are based on sources considered as reliable. Sygnum Group uses its best efforts to ensure the timeliness, accuracy, and comprehensiveness of the information contained in this document. Nevertheless, all information indicated herein may change without notice.

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