Return on Assets? cash flow?

I am new to crypto, and i have a lot of people at work telling me buy this coin and that, and i truly am asking out of curiosity. But when I buy shares of company stock, yes i want to be able to sell it for more to someone else in the future, but the stock could gain value because the company has increasing cash flow. that company literally is generating profit, and so the stock is worth some multiple of that profit.

With cryptocurrency, I don’t see how it is something that generates any return on investment? best case scenario, I sell it to someone else for more, just because of hype. there’s no cash flow. Am i missing something on why crypto would be an appreciating asset over many many decades and not just a speculative bubble/game of hot potato? Or is there something I’m missing with how it could be a 5% gainer for 20+ years?

View Source

17 thoughts on “Return on Assets? cash flow?”

  1. In my honest opinion, the fact that people don’t ask this question often enough makes me bullish on my investment. No offense to the repliers, but a lot of answers here too are just saying it’s speculative or don’t have an answer with any further information.

    To start your research, checkout Token Terminal (Not a coin), they research & provide data on revenue generating protocols, protocols with use cases & fees that generate revenue. One example of a protocol to checkout would be gTrade. This one does have a coin but I’ll let you research that. In gTrade’s example they have a real use case that has fees, and very soon (weeks) you will be able to stake & earn a % of those fees.

    Where I am at in my research for example is just finding these types of protocols, and soon it becomes not about the price, but the use of the protocol itself and then the price will follow that in the long term.

    Honestly, it has narrowed down my choice of crypto coins by a LOT. But they do exist. And most people are not talking about them. Case in point here.

    Reply
  2. After Ethereum merges to POS, the APR you earn from staking go from 4% today to ~7%, that includes 3% from user gas fees.

    Whenever blockspace gas costs are above 7 gwei, more gas will be burned (EIP1559) in congestion fees than is paid out in inflation making the chain net deflationary, and only inflationary when it’s not congested.

    Since some of the APR comes out of blockspace sales/tips you can calculate backward, assuming similar conditions are met, to see what the APR would be had the chain been POS during that era. There were some days gas averaged over 500 GWEI… It’s about 10-20 today in contrast. That would push APR to nearly 15% (for some days) with only a few % coming from new inflation.

    The more people who stake (and remove their ETH from circulation) the lower the APR will become until it reaches some fair market equibilirum.

    Only 30% of the total supply can be staked at a time, and there’s a queue to enter/exit from your validator. You’re able to collect all rewards right away however without exiting the queue. You’d be able to convert the reward into a stablecoin to reduce speculation (if you decide to forego compound interest), so that way you have some ROI even if the price was trending downward.

    Ethereum isn’t meant to be used as a currency anymore. That is all being pushed off onto L2’s. Eventually L2’s will be competing for blockspace, and each carry 1000 transactions worth value, so gas fees will likely increment up (assuming Metcalfe’s law) despite user fees trending near $0.00 in the same time.

    L2’s also have a competitive edge against other L1 blockchains because it’ll always be much cheaper to pay for ETH blockspace than to budget for a seperate decentralized security system, so any coin an L2 issues will be a cash cow as it can be backed by profit rather than senseless inflation.

    Sort of unrelated but the daily new ETH issuance from POW was 13500, in POS it will be 500 min. to 2700 max. depending on how many ETH are staking. Implying it will be harder to buy whenever there’s high demand.

    https://cryptofees.info/

    https://moneyprinter.info/

    https://l2fees.info/

    https://ultrasound.money/

    The financials are sound. It’s too hard to see how they’ll all fit together in reality though, a year or five from now.

    Reply
  3. It’s highly speculative at this stage. Just stick to the big boys BTC and Eth. They’re a lot safer and still set for huge gains

    Reply
  4. You are missing nothing. It’s debatable whether any coin has any value at all, and if it does literally no one knows what it is or what its connection to any other indicators is. There is zero evidence so far to believe in any underlying long term growth, and there probably never will be. It’s good only for pure speculation and in this sense is only different to a casino in that at least casinos are prevented by regulation from trying to scam you out of your money.

    Reply
  5. I look at it similar to buy company stocks, but you are buying coins (stocks) in an IT project (company). The IT project is developing new IT services that will hopefully make them money thru fees, licensing etc. They are just a lot more likely to fail quickly and go to $0 than traditional company stocks will.

    Reply
  6. It only works if you just buy Bitcoin. Diversifying into thousands of other cryptos really defeats the purpose of having a fixed supply.

    Plus only Bitcoin is secure. Everything else is basically a Ponzi scheme.

    Reply
  7. Think of it as a hedge on the fiat currency system becoming increasingly dysfunctional.

    Imagine if someone invented a new tool and it was a tool that everyone else in the world used (money), and this tool was getting better each year while the tool everyone was previously using for the job was getting worse. Now if you could buy into this tool for cheap and get to use it as it became standard that’s what Bitcoin is , it is a value communication network and you can own a piece of it to use it. The more you own the more value you can communicate to others.

    Depending on how problematic you expect fiat currency to become, and how much you need to use money, you can get some allocation that makes sense. 1%-2% of your liquid wealth into BTC and eth makes sense as a hedge.

    Reply
  8. Well there are cashflows in crypto:

    – Staking
    – Yield Farming
    – Lending
    – Transactions fees

    I don’t think applying framework for stock valuation is a good idea. Earnings are the end-all-be-all of a company’s value. Public blockchains are not companies.

    Public blockchains are supposed to act like countries & its natives tokens as their currencies. That’s why you should not price blockchains like companies instead you should price them like countries.

    If you want to know in which coins you should invest you could use the quantitative model of money and look for analogies.

    For example:

    If the GDP of a country goes up, that’s good for the economy. But I get it, there is no measure for the GDP of a blockchain.

    We could use number of transactions, number of new wallets, TVL to evaluate the activity of a blockchain. Add the effect of these things and you could see them as the GDP. Historically when the parameters I mentioned go up, the activity of a network increases leading to more demand for a coin, ending with the price going up.

    Tl;dr: Don’t apply framework for stock valuation. Check: network activity & demand.

    Charts: https://etherscan.io/charts

    Reply
  9. Highly volatile atm, but check the all time lows on main projects , as they increase with each bull/bear run , the next bear will be higher … most predictions gave Btc at 8k low, not really obvious at all.

    This market will grow exponentially in the following years/decades.

    Reply
  10. I truly believe the ROI is in the process itself. It helps create individual prosperity by giving access to tools people would not normally utilize for opportunity in a decentralized financial market.

    The connectivity, instant settlement, liquidity pools and the ability to record keep your project is not something to overlook when discussing a possible blockchain ledger that natively records every transaction to its history of transactions.

    See now introducing things like insuring a chain or an asset are then raised in question and we are coming to the time of smart contracts. It’s interesting the capabilities of what we will be able to do and record on blockchains.

    The ROI is in the meat and potatoes. It’s the internet roads being built all over again 2.0.

    What protocols are going to revolutionize this monetary feat.

    Reply
  11. Crypto isn’t like stocks, it’s its own beast, there is no point trying to pigeonhole it.

    One simple (imperfect) anaolgy is to see Bitcoin as digital gold. Gold doesn’t generate cash flow, does it? You are just selling it to someone else later, hopefully at a higher price.

    Anoother way of seeing crypto is as a nascent new technology that is slowly gaining mass adoption. More and more people use crypto every day, while the total number of Bitcoin (and various other coins) has a hard cap. Fixed supply at increading demand = higher price.

    From your post I get that you are really early into your exploration of this space and I would highly recommend to invest more time to understand how this all works before you invest serious money into it. My other advice would be to stick to the major coins first: BTC and ETH. They are by far the least risky and still give good returns if you have patience.

    Reply

Leave a Comment