Why Crypto is Still Massively Overvalued

Cryptocurrencies have had a painful year. But you ain’t seen nothin’ yet.

The promise of many major protocols like Ethereum is that they can power useful apps. But despite their giant valuations, almost no one is actually building anything.


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From a new report on the Swiss crypto site Blockzeit:

…according to the data from December 2022, Ethereum (ETH +2.21%) has 183 active developers each day, which is the most among all blockchain protocols and dapps. Cosmos (ATOM +1.41%) and Cardano (ADA +0.18%) came in second and third, respectively, with 145 and 142 active developers. A total of 18 active engineers are presently working on Bitcoin (BTC +0.44%), the most valuable cryptocurrency by market capitalization.

Ethereum has a fully diluted market cap of $148 billion. That’s after dropping by two thirds this year.

That puts the value of Ethereum at over $800 million per developer. This valuation is absurd.

Consider that Microsoft employs about 100,000 of the best coders on earth. And yet, each is worth just $18 million of market cap.

Microsoft carefully screens engineers and hires the best of the best. Almost all of them work full time.

Can every random person who writes a single line of code on Ethereum be worth 40 times as much?

The numbers for other cryptocurrencies are even more stark. Bitcoin has just a handful of engineers, despite a fully diluted market cap of $356 billion.

If we follow Microsoft’s developer to market cap multiple of $18 million, Ethereum is worth just $3.3 billion. That’s 98% less than its current value.

There are real use cases for crypto. But enthusiasm, and prices, got way ahead of reality.

“There’s the signal and the noise. In crypto, 99% of it was noise. But there’s real value and signal there.”

Mark Cuban

I’ll be avoiding this market until I see some real products.

What do you think of crypto valuations? Leave a comment at the bottom and let me know.

The next blog will be on Friday — I’m going camping!

More on markets:

Tiger Global Losing $185 Million a Day

Seeing Through SBF: How One VC Found the Truth

How SBF’s Hedge Fund Imploded

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Photo: Ethereum founder Vitalik Buterin “593513273GS308_TechCrunch_D” by TechCrunch is licensed under CC BY 2.0.

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