Valuing blockchain and cryptocurrency projects presents unique challenges due to the nascent stage of the industry and the complex, decentralized nature of these networks. Traditional financial models often fall short, requiring investors to adopt alternative frameworks tailored to the digital asset ecosystem. In this guide, we’ll explore several widely used valuation methods that help assess the relative worth of major cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Solana (SOL), and Arbitrum (ARB).
These approaches draw inspiration from conventional finance—such as price-to-sales and price-to-book ratios—but are adapted to reflect on-chain activity, user behavior, and network economics. By understanding these metrics, investors can make more informed decisions in a volatile and rapidly evolving market.
👉 Discover how real-time on-chain data can enhance your crypto valuation strategy.
Understanding the Stock-to-Flow Model: A Scarcity-Based Approach
One of the most discussed models for valuing Bitcoin is the Stock-to-Flow (S2F) model. This framework treats Bitcoin like a scarce commodity—similar to gold or silver—where value stems from its limited supply and predictable issuance schedule.
The S2F ratio measures how many years it would take to produce the current circulating supply at the current rate of new production. For Bitcoin:
- Circulating supply: ~19,718,303 BTC
- Daily issuance: ~450 BTC (~164,250 BTC annually)
- Stock-to-Flow ratio: 19,718,303 ÷ 164,250 ≈ 120
This places Bitcoin’s S2F ratio at an all-time high, suggesting extreme scarcity. Historically, each halving event—occurring roughly every four years—reduces new supply by 50%, sharply increasing the S2F ratio and often preceding significant price rallies.
Based on this model, Bitcoin’s fair value is estimated at $77,567**, with a one-standard-deviation range between **$43,691 and $137,707. While critics argue the model oversimplifies market dynamics, its historical accuracy in tracking major price movements makes it a compelling tool for long-term investors focused on scarcity-driven value.
Market Cap vs. On-Chain Revenue: The P/S Analogy
A key metric for evaluating blockchain networks is the Fully Diluted Market Cap (FDMC) to 30-Day Annualized Fees ratio. This is conceptually similar to the price-to-sales (P/S) ratio used in traditional equity valuation.
Here, “fees” refer to transaction costs paid by users—commonly known as gas fees—which represent real economic activity on the network. Higher fees indicate stronger demand for block space and greater utility.
As of mid-2024 data from Blockworks Research:
- Solana (SOL), Arbitrum (ARB), and Ethereum (ETH) rank among the most attractively valued blockchains using this metric.
- Despite Ethereum’s dominance in fee generation, its competitors offer lower multiples due to aggressive scaling solutions and lower base fees.
This suggests that networks like Arbitrum and Solana may be undervalued relative to their current usage levels—especially when considering their growing dApp ecosystems and user adoption.
👉 See how leading blockchains compare in real-time transaction volume and fee revenue.
Market Cap vs. Total Value Locked (TVL): The P/B Equivalent
Another powerful valuation lens is Fully Diluted Market Cap to Total Value Locked (TVL)—a proxy akin to the price-to-book (P/B) ratio in traditional finance.
TVL represents the total amount of capital deposited into decentralized finance (DeFi) protocols across a blockchain. It reflects investor confidence and the depth of financial infrastructure within an ecosystem.
According to data from DefiLlama and Mulana IM (June 2024):
- Arbitrum and Ethereum stand out as relatively undervalued when compared to peers.
- Ethereum maintains the highest absolute TVL, but Arbitrum shows strong growth momentum due to its Layer 2 efficiency and lower transaction costs.
A low FDMC/TVL ratio may signal that a network’s market cap hasn’t yet caught up with its underlying economic activity—potentially indicating a buying opportunity for forward-looking investors.
Market Cap vs. DEX Trading Volume: Measuring Exchange Activity
The Fully Diluted Market Cap to 30-Day Annualized DEX Volume ratio focuses on trading activity within decentralized exchanges (DEXs) built on each blockchain.
While not comprehensive—since it excludes lending, staking, NFTs, and other DeFi activities—DEX volume remains one of the most liquid and transparent indicators of user engagement. This metric parallels the market cap to gross merchandise value (GMV) ratio used in internet platform valuations.
Key insights (Blockworks Research, June 2024):
- Solana (SOL) and Arbitrum (ARB) lead in terms of favorable valuation multiples.
- Solana benefits from ultra-fast transactions and low fees, driving high-frequency trading on platforms like Raydium and Orca.
- Arbitrum dominates Ethereum’s Layer 2 landscape, capturing significant DEX volume from Uniswap and Camelot.
High DEX volume relative to market cap suggests strong organic demand and efficient capital turnover—both positive signals for ecosystem health.
Market Cap vs. Active Accounts: The MAU Benchmark
The Fully Diluted Market Cap to 30-Day Active Accounts ratio mirrors the market cap to monthly active users (MAU) metric used to value tech platforms like social media or e-commerce sites.
Each active account represents a wallet interacting with dApps on a given network. However, this metric has limitations:
- It may undercount users who interact via Layer 2s or sidechains.
- Networks like Ethereum, Optimism, and Avalanche increasingly rely on secondary scaling layers, meaning on-chain activity doesn’t fully capture real user engagement.
- Wallet reuse or bot activity can distort numbers.
Despite these caveats, tracking active accounts over time helps identify trends in adoption. A rising user base paired with stable or declining market cap can signal undervaluation.
Data sources: CoinMarketCap, Artemis, Mulana IM (June 29, 2024)
Beyond Snapshots: Tracking Historical Valuation Trends
While cross-sectional comparisons are useful, analyzing historical valuation trends offers deeper insight. A blockchain might appear expensive today compared to peers—but if it’s historically cheap relative to its own past multiples, it could still represent value.
For example:
- Ethereum may have a higher FDMC/fees ratio than Solana today, but if it's trading below its historical average, it could be entering a contrarian buy zone.
- Conversely, a coin surging in price without corresponding growth in TVL or active users may be overbought.
Investors should use these ratios dynamically—not in isolation—to build a holistic view of network fundamentals.
👉 Access live analytics on blockchain valuation trends and investor sentiment.
Frequently Asked Questions (FAQ)
Q: What is the Stock-to-Flow model used for?
A: The Stock-to-Flow model estimates asset value based on scarcity. It’s primarily applied to Bitcoin and precious metals, measuring how long it would take to reproduce the current supply at current production rates.
Q: Can traditional valuation models be applied to crypto?
A: Yes—with adaptations. Metrics like P/S (via fees), P/B (via TVL), and MAU (via active wallets) provide familiar frameworks but must account for blockchain-specific dynamics like decentralization and tokenomics.
Q: Why is DEX volume important for valuation?
A: DEX volume reflects real user-driven trading activity on a blockchain. High volume indicates strong ecosystem engagement and liquidity, making it a valuable input for assessing network utility.
Q: Is Total Value Locked (TVL) a reliable metric?
A: TVL is useful but imperfect. It can be inflated by yield farming incentives or short-term deposits. Always pair TVL analysis with other metrics like revenue retention and protocol sustainability.
Q: How do Layer 2 solutions affect valuation metrics?
A: Layer 2s complicate on-chain metrics by shifting activity off the mainnet. For example, Ethereum’s true user count may be underestimated if only mainnet interactions are counted. Analysts must incorporate off-chain data for accuracy.
Q: Which blockchain appears most undervalued based on current metrics?
A: Based on mid-2024 data, Arbitrum (ARB) and Solana (SOL) show favorable valuations across multiple dimensions—including fees, TVL, DEX volume, and active usage—making them stand out among major blockchains.
By combining these valuation methodologies—scarcity models, revenue multiples, user metrics, and historical trends—investors can develop a nuanced understanding of where value truly lies in the crypto market. As the space matures, these frameworks will continue evolving, offering ever more sophisticated tools for discerning long-term winners.
Core keywords: cryptocurrency valuation, blockchain metrics, stock-to-flow model, fully diluted market cap, total value locked, DEX trading volume, active accounts, Ethereum, Solana