By Kevin Helms - June 9, 2017
P/E Ratio Analysis Suggests Bitcoin is Not in a Bubble
Bitcoin Bubble? Analysis Suggests There Is More Room to GrowIn an article published by Market Watch on Thursday, ARK Invest’s blockchain analyst Chris Burniske explained why the “rally still has room to grow,” the publication wrote. Burniske used a modified price-to-earnings (P/E) ratio method which he helped develop.
“The reason I call it a P/E ratio is because when I think about what a P/E signifies for equities, it is basically the function of market cap and earnings,” he said. “The earnings are the underlying utility—the cash flow of the company.”
From it, he derived a healthy outlook. “Bitcoin’s ‘P/E ratio’ looks at the digital currency’s network value—the number of outstanding bitcoins multiplied by price,” he calculated. “This figure is currently $44.69 billion—against its daily transaction volume,” the article explained. Burniske’s metric currently gives bitcoin a P/E ratio of roughly 50.
He told the publication:
On a stock, a P/E ratio of 50 would be pricey. But I don’t know if it should be considered pricey for bitcoin…It looks to be in a comfortable range, it isn’t an outlier and right now the broad takeaway I have is that it doesn’t look like we’re due for a mean revision.
Three More Reasons Bitcoin May Not Be in a Bubble
Bitcoin Bubble? Analysis Suggests There Is More Room to Grow
Financial blogger and author Charles Hugh Smith recently offered three key reasons why bitcoin is not in a bubble, Market Watch reported. Smith’s popular blog oftwominds.com is #7 on CNBC’s top alternative financial sites. His articles are often republished on other popular blogs including Zero Hedge, the Mises Institute, Financial Sense, and Peak Prosperity.
Firstly, Smith said bitcoin and other cryptocurrencies “have utility value,” unlike Beanie Babies. There are many uses of bitcoin such as to facilitate international payments for goods and services.