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Token Valuation in Crypto: Merging Venture Capital Principles with Crypto-Specific Metrics for Long-Term Investment
In our quest for long-term, value-driven investments in the diverse world of crypto—from DeFi to NFTs to new blockchain protocols—we find it crucial to combine traditional venture capital principles with specialized crypto metrics. Having a macro thesis for the broader space, as well as individual sectors, serves as our north star for making informed buy-and-hold decisions.
The Importance of a Macro Thesis
Our macro thesis acts as a guiding compass, providing us with the strategic direction needed to traverse the ever-changing landscapes of various crypto sectors. It's not merely about surviving the turbulence; it's about identifying assets that align with our long-term vision.
Traditional VC Principles: The Foundational Layer
These principles offer a foundational approach to assessing the potential and viability of any investment, crypto or otherwise.
Problem Significance: How pressing is the issue that the project aims to solve? The larger the problem, the greater the potential for significant long-term value.
Leadership and Team: The capabilities and adaptability of the leadership team can be critical in steering a project through an array of challenges.
Market-Product Fit: Meeting an existing or emerging market demand is crucial for long-term project viability.
Crypto-Specific Metrics and Diligence: The Specialized Layer
These are metrics and approaches specifically tailored to the nuances of crypto asset evaluation.
Narrative Impact: The power of a compelling narrative in shaping market sentiment cannot be ignored.
Community Engagement: The size and activity levels of a project's community offer valuable signals about its health and long-term prospects.
Unique Token Holders: On-chain analysis of token holder distribution can provide insights into adoption and decentralization.
Token Utility: Look for features that enable the token to capture value over the long term, from revenue sharing to governance mechanisms.
Quantitative Metrics: These include User Metrics, Revenue Streams, Total Value Locked (TVL), and various Financial Ratios such as Price-to-Sales (P/S) and Price-to-Fees (P/F).
The Integrated Approach: Long-Term Investment Through Comprehensive Diligence
Don't use any of these indicators in isolation. The real skill is bringing all together and adapting them to the market conditions.
We blend traditional VC principles with crypto-specific metrics to form an integrated approach to asset evaluation. This comprehensive perspective, guided by our overarching macro thesis, enables us to make well-informed buy-and-hold investment decisions. In a market landscape as dynamic and volatile as crypto, this balanced and thorough approach is our methodology for identifying assets that align with our vision for long-term growth and value creation.
For a deeper dive, check out the following article series.
Announcement / Update
I am excited to share that we are in the process of rebranding CryptoBull Capital to “Digital Wealth Insider” and are launching a new content series on October 11.
This will include a new podcast interview series called “Contrarian”, a weekly blog, newsletter, and daily social media content on all platforms.
If you are interested in learning more about the series and rebrand, reply to this email.
Disclaimer: The information provided in this article is for educational and informational purposes only. It is not intended as financial advice and should not be construed as such. Always consult with a professional financial advisor before making any investment decisions. The author and publisher of this content are not responsible for any loss or damages resulting from the use of the information provided herein. Cryptocurrency investments are subject to market risks, and past performance does not guarantee future results.