'Krypto does not take care of fundamental data.' Is that sustainable?

'Krypto does not take care of fundamental data.' Is that sustainable?

Most cryptocurrencies die.

It is known to everyone who has witnessed more than one cycle. Hundreds, if not thousands of tokens, rise next to Bitcoin and Ether, but rarely - or often never - all times.

Only 25 of the 200 largest digital assets after market capitalization reached new highs in January 2018.

Half were Layer-1-tokens like Litecoin, Ether and Cardano. Five were governance tokens that give voting rights that drive decentralized financial protocols such as GNOSIS and DISTRICT0X.

It is not a rosy picture. But the prospects continue to worsen when stated how much a cryptocurrency in Bitcoin is worth, instead of in the usual dollar.

Change at Bitcoin prices, and only six of these cryptocurrencies exceeded their previous maximum in the same period: Dogecoin, Binance Coinchainlink, Decentraland, Vechain and Enjin Coin.

A small selection of winners that only make up 3 % of the 200 best digital assets. There is also no clear trend that connects them.

Dogecoin is literally a "to-the-moon" self-parody, while the Layer 1-token-Vechain is powered by the MEM "Blockchain for Supply Chains".

Binance Coin has a certain stamina, which is supported by tempting combustion mechanisms. Chainlink has more use than most others and supports an extensive ecosystem of data feeds and prices Orakel that connect different blockchain and smart contracts, to transactions without Validators of third -party providers.

Decentraland and Enjin Coinder Success of, say industry participants, can be partially explained by the metaversum-brouhaha and blockchain-powered gaming dapps (decentralized applications), which are expected to be popularly gained.

Such false connections indicate that most digital assets in a bull market inevitably become crescendo, but quickly go broken as soon as the hype fades-determined to never visit their glittering fame again to destroy the top purchases of bag holders.

So how do you justify digital assets fair? What is crypto really worth?

When you consider that the top 200 coins of the previous bull market in dollars have fell by more than 90 % of their all-time highs, how and why do the markets decide how deep they fall?

Cashflows are Bärisch

token Terminal is a platform that offers opportunities to find out everything. It offers a number of metrics that aim to compare different protocols, reflect the traditional corporate assessment methods in terms of price-profit ratio and overall sales.

"If you look back, especially if you compare the Bullenmarkt from 2018 with what we experienced in 2021, it is very difficult to really set up a thesis about why certain tokens are successful," said Oskari Tempakka, growth manager of TOKENTAL, to block works.

The platform measures protocols that generate cash flow in addition to blockchain startups that operate entirely on-chain. During the last bull market, it was not possible to evaluate protocols based on these factors, said Tempakka, since it was only in mid-2020-during the defi summer-when the first applications based on Ethereum actually started to generate positive cash flows for the protocol.

The conclusion: The highest flying cryptocurrencies of the last bull, whether to analyze dollar evaluation or Bitcoin, on a fundamental basis is basically impossible.

Layer-1S, the backbone of digital assets, exceeded this time on the basis of a healthy level of awareness and the efforts of legions of developers as well as market makers and capital-strength traders who prefer assets with more liquidity.

There must be a considerable market capitalization for a hedge fund of over $ 1 billion in order to take the effort, to act with an asset-or to move the price pin so strongly in order to build a long or short leg that profits are obsolete.

"I would say that the thesis behind Layer 1S is that it essentially builds up an infinitely scalable settlement layer for all other applications that build on it," said Tempakka. "It is easier to build up a more optimistic thesis without a rating limit than with a pure application-we currently see Layer-1 companies, at least those who are actually able to generate cash flow and grasp this value."

The cash flows are actually declining because they refer to try to provide crypto systems with a price tag. They are not bearish in and themselves as a metric, but industry participants argue that the quick growth course of crypto requires a different framework.

The application of conventional fundamental stock picking techniques would never work with risk-capital-supported startups, you say-why should it work when it comes to digital assets?

If it is possible to evaluate a crypto asset based on conventional fundamental data, then a relatively direct comparison with a company from the real world should also be possible.

"KRYPTO does not take care of fundamental data, traditional understanding of cash flows," Hassan Bassiri, Vice President of Portfolio Management at Digital Vermis Manager Arca, told Blockworks. "The nature of crypto is that it takes care of the growth potential."

Bassiri added: "Let's say something like Aave or Yearn is traded with a price turnover ratio of 1,000, but his FinTech competitor Neobank is traded at 200-is the cryptocurrency worth a 5x of it?"

The development of cash flows for evaluating digital assets-just like an Amazon or Tesla share-implies that you cannot rise forever, an idea that resembles crypto-the-hard.

In fact, cash flows offer a method for evaluating digital assets, which automatically means that they cannot rise forever, a term that resembles cryptonite for cryptocurrency investors.

The result: a volatile market, on the head, prioritized the social mood and glamor over Econ 101.

markets that are driven by fundamental data are on the horizon

If the look into the past does not explain how dealers evaluate digital assets, who can then say which projects from a sea have a realistic opportunity to survive the Baisse?

A reason for optimism according to Bassiri: More and more protocols are working on linking real applications with the on-chain yield. A typical example: Makerdao's most recent step to award a loan of $ 100 million to the 151-year-old Huntingdon Valley Bank, with the potential to increase the loan revolver to astonishing $ 1 billion.

Tempakka from TOKEN Terminal competes for the prospect of a future in which the majority of the top tokens are driven by measurable fundamental data-and you have to generate sustainable cash flows to advance this model.

"If you are a traditional private equity investor, you will reach a stage in which you can see the sales data of the crypto protocol and actually build a strong contact thesis on it," said Tempakka.

In other words, it is slowly becoming - then perhaps at once - it is possible to rationalize crypto games on something more tangible than hype or faith.

Many institutional dealers who focus on digital assets would argue that the world is already there. Crypto hedge funds create complicated quantitative models around the social mood and ebb and flood in the commercial volume.

But these players are often the first to admit that beliefs that develop strategies change quickly in cryptoland. Fundamental key figures finally become a mighty reserve for experienced investors - think of the rise of discretionary strategies - but at the moment they are only part of the overall puzzle.

The rest is filled out by thorough research that examine the advantages and disadvantages of development teams and their skills or their absences in order to master the sublime, winding path that lies in front of them.

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