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HEALTH, WEALTH, AND HAPPINESS |
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| "What you measure, you manage." - Famous management saying |
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| New Investor Scorecard! The cryptocurrency DASH has gained traction with 150,000 merchants and services, but is it a good long-term investment? Download our analyst report and find out.
Not a Blockchain Believer? Sign up here and get access to the complete library of investor scorecards and resources. |
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| Correction and apology: Hoo boy. We made two errors in yesterday's newsletter describing crypto price-earnings ratios (P/E ratios). (It was not the first mistake we've made, and it will not be the last.) Thanks to all the readers who let us know: here's the corrected version.
How to Interpret the P/E Ratio in Crypto (Token Terminal): In this two-minute video, you'll learn how P/E ratios, a longtime favorite of traditional investors, can be applied to crypto.
Investor takeaway: This is two minutes well spent. You'll see how top crypto projects generate real revenue. When you divide the total market cap (price) by this revenue (earnings) -- not the other way around -- it can help you see which tokens may be overvalued or undervalued. See below. |
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Here are the top blockchains sorted by P/E ratio, courtesy of Token Terminal: |
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| Investor takeaway: A low P/E ratio does not necessarily mean "buy this token." But it is a signal to investigate the token further.
In plain English, a low P/E ratio means the blockchain is earning money, but investors are valuing the project lower than other blockchains. That could be a sign of a token that is "on sale."
In the chart above, Filecoin (on the left, with a 639-to-1 P/E ratio) is being valued much higher than Ether (on the right, with an 88-to-1 P/E ratio). Based solely on P/E ratio, Filecoin is either overvalued, Ether is undervalued, or (more likely) both.
However, be careful about relying solely on any one financial metric: P/E ratios are good indicators of where to start your investing research, but more research is always recommended. |
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| When I was a kid, my godmother used to mark my height on the door frame whenever I came to visit. In the beginning, it was great: "I’m growing!" I would think to myself. Unfortunately I never got much past the five-foot-five mark, so then it got embarrassing. Investors can also measure their growth by diligently calculating the value of their investments, month after month, year after year. In the world of crypto investing, however, most people are not measuring long-term performance. I would love it if YouTube had a requirement that anyone posting a video about the latest meme coin or "CRYPTOS TO BUY NOW!" had to include their lifetime investing performance. Say it with me: I will measure my lifetime investing performance. We want to measure our investments over the long term, where it matters. Anyone can get lucky in the short term, but the professionals will show you the long term. Most stock-picking professionals don’t want to show you the long term, because the vast majority cannot beat the average market return (that is, buying and holding the entire stock market through a low-cost index fund). Similarly, most “crypto pros” don’t want you to see their long-term performance, because they can’t beat the profits of just buying and holding bitcoin. Casinos would be a lot less popular if they required you to track your long-term performance: every win and loss from every visit to the slots, tallied up in a simple number. People would quickly realize that "the house keeps winning and I keep losing." It’s so easy to get swept up in the hype peddled by all these crypto newsletters: new token launches! Airdrops! Web3 derivatives! The question we should be asking is: What is the long-term performance of the people writing these newsletters?
At Bitcoin Market Journal, we measure our long-term performance, and we'll show you our results below. |
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| Much of the crypto industry is fueled by the promise to “get rich quick.” But smart investors think long term: don't “get rich quick,” but instead “get rich, and make it stick.”
Warren Buffett didn’t make his billions by day trading. To the contrary, he and his team slowly and methodically analyzed many, many companies before placing big bets on just a few. Time and patience are an investor’s greatest friends, and that goes doubly for the fast-moving world of crypto investing. Every time you make an impulse trade, based on some hot tip found in a crypto newsletter or Discord server, you pay dearly in the form of gas fees and service charges. These demolish your long-term results. Let's take social investing platforms like eToro, which are a cool idea: watch the performance of other investors and copy their portfolios if you like them. Transparent, right?
But they’re not really transparent about long-term results: they don’t factor in fees, and they don’t show long-term performance (they default to the last 12 months).
We in the crypto industry have got to do better. |
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| Here are the top-performing traders on eToro as of today’s writing. Note you would have doubled the returns of victorlee448 (2.84%) by just buying and holding a fund representing the total stock market (5.9%). In crypto investing, there’s a lot of cherry-picking date ranges that happen to look good. eToro would do its users a great service by highlighting the lifetime performance of its traders, not just 12-month performance, as the default. (Anyone can get lucky for a year.) Understand the business model of crypto exchanges: it's in their interest to sweeten the results, so people trade more frequently, which generates fees.
Buying, holding, and waiting patiently doesn’t generate a lot of fees. This strategy keeps the money in your pocket, where it belongs.
The crypto industry needs to follow the mutual fund industry, which regularly lists fund performance since inception. (On Vanguard’s website, for example, it’s the far right column.) This is true long-term performance. We’ve got to demand measurement of long-term results – of crypto companies, of fund managers, and of ourselves. It’s the only way to know if we are actually beating the stock market, or “just buying and holding bitcoin.” At Bitcoin Market Journal, we’ve been measuring the results of our portfolios since they began. Here are the latest measurements of our long-term results, updated for Q1 2022. |
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Blockchain Believers Portfolio Performance Our Blockchain Believers Portfolios are based on the simple strategy of starting with a “plain vanilla” portfolio of stocks and bonds (preferably through the index funds we mentioned above) and then adding a small amount of crypto (between 2.5% and 10%). |
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| To keep things simple, that 2.5-10% of crypto can just be buying and holding bitcoin (as in our “Bitcoin Believers” portfolio), or a mix of bitcoin and Ether (as in our “Big Believers” portfolio). Even though the first quarter of 2022 was rough for both stocks and blocks, our long-term performance is still far superior to the “Non Believers” portfolio (i.e., no crypto). |
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Here's the monthly measurement of progress since the beginning: |
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Future Winners Portfolio Performance
Last July, we rolled out our new Future Winners Crypto Portfolio, which is an all-crypto portfolio made up of just four equally weighted investments: BTC, ETH, BNB, and UNI. Here are the results to date, compared against the stock market: |
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Here's the monthly measurement of progress since the beginning: |
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| It’s only by looking at long-term results that we can measure the patterns and trends that make us better investors. Looking at daily price charts doesn’t cut it, and cherry-picking the best time periods is even worse. Instead, smart investors look at results when they’re good and when they’re bad. It’s no fun to review bad results, but that’s the only way we get better. Even when the answer is “be patient and stay the course,” as it usually is for long-term investors, we can at least build our muscles of patience and persistence. And these are some of the most important muscles to build. Some Things Can’t Be Measured It’s tough to measure the things that really matter in life: love, friendships, self-worth. But it’s comparatively easy to measure long-term investing performance. Before listening to that crypto bro on Reddit, demand to see their long-term investing performance. Instead of jumping into a new DeFi project offering 8,000% annual percentage yield, wait to see the long-term performance. We’re in this for the long term. Build those muscles of patience. That’s the only way to accumulate wealth that lasts. |
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| Health, wealth, and happiness,
John Hargrave Publisher |
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| Be patient, and demand measurements of long-term results. (Click to share.) |
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| Bitcoin Market Journal is a daily newsletter that makes you a better crypto investor. It is created by Evamarie Augustine, Charles Bovaird, Mati Greenspan, John Hargrave, and Alexandre Lores.
Paid subscribers get full access to our top crypto picks; both free and paid subscribers get content to build you into a better investor.
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