Valuing blockchains with Michael Nadeau: an institutional investor's perspective | Fundamentals ep.61

In this episode of the Fundamentals podcast, I’m joined by Michael Nadeau, a crypto data and research analyst, and author of The DeFi report.

Listen to the episode:

We explore how blockchains can be valued, especially from the perspective of more traditional and institutional investors. We discuss the main differences between traditional assets and crypto assets - focusing on L1 blockchains and their native tokens, the role of key metrics in analyzing these projects, we speak about market consensus and the roles of buy and sell-side analysts, the similarities and differences between blockchains and web2 businesses, and how comparisons can be drawn from specific key metrics.

Michael also walks us through several valuation frameworks and how they can be applied to blockchains, and we wrap things up with thoughts on how he sees valuation frameworks developing now that institutions are slowly entering the space.

Timestamps:
00:00 Introduction
02:00 Mike’s introduction & background
04:33 The main differences between a traditional asset (stock), and a crypto network (Ethereum)
09:05 The role of key metrics in analyzing assets (crypto vs. tradfi)
13:07 The typical roles and perspectives of buy-side and sell-side analysts
16:42 Conducting due diligence
18:18 Comparing Ethereum to traditional businesses like Apple and Amazon
21:58 Token incentives as a superior capital formation tool
27:25 Valuation methodologies: Robert Greer framework
30:47 Valuation methodologies: DCF analysis
32:21 VanEck’s Ethereum valuation methodology
34:45 Valuation methodologies: TAM analysis
36:25 Blockchains as economies & GDP analysis
38:59 How metrics like L2 take rate, App/Protocol layer take rate, and validator yield effect the value of an L1 blockchain
42:06 Closing thoughts: the future of valuation frameworks for crypto networks & the effects of institutions entering the space

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