Thoughts
Calculated a p/e ratio of 186 (Edit: 747) (Edit: 81) for ETH today.
Amount staked (34M ETH) [0] / amount paid in transaction fees (182k ETH) [1].
=> https://cryptoquant.com/asset/eth/chart/eth2/total-value-staked [0]
=> https://etherscan.io/chart/transactionfee [1]
Really curious if this analysis is sound. The most obvious flaw is that ~100% of transaction fees are paid out to stakers but e.g. AAPL pays out ~25% of earnings as dividends ($0.25 dividend per share per quarter [2] / $0.97 earnings per share per quarter [3]). Still makes ETH look pretty overpriced considering Apple's P/E of 31.
=> https://investor.apple.com/dividend-history/default.aspx [2]
=> https://www.apple.com/newsroom/2024/10/apple-reports-fourth-quarter-results/ [3]
But I haven't ever invested in crypto so I don't know if I'm doing something completely wrong.
Edit [Apr 21, 2:36pm]: Apple's P/E ratio is quarterly, but I think the 186 is annual. IIRC I got to 182k by taking one month of transactions and multiplying by 12. So let's ~~divide~~ multiply 186 by 4 to get ~~46.5~~ actually ~750.
But that wasn't the issue that's tickling my System 1 into insisting that this is wrong. The outstanding issue is that this is independent of ETH/USD price. I'm going back and forth whether that's relevant. I don't think it is. The logic behind P/E ratio is that earnings are, in some sense, the real value of a business. And so we have to treat ETH transaction fees as representing real value divorced from the USD/ETH rate (which is an interesting assumption, but one I'm comfortable making). So what I'm saying is that since people spent ~72 million USD on transaction fees last quarter, that's a good estimate of what they'll spend in future quarters. So to calculate a price target we can say, given ~34M ETH staked (shares outstanding) and 72M USD paid out, 1 ETH staked should give you 2 USD per quarter. No BS, no ponzi schemes, etc. Assuming a fair 20 p/e ratio per quarter, staking one ETH should then cost $40.
Okay, I finally see what my System 1 was getting caught up on. I've been conflating shares outstanding with market cap. Is 34M ETH the number of shares or the market cap? I mean it's clearly both. You should be able to get P/E by dividing market cap by total earnings or price per share by earnings per share.
When calculating Eth's PE with market cap by total earnings I get (34,000,000 ETH staked / (182,000 yearly transactions / 4)) = 747.
When calculating with EPS I get 1,500 (USD per ETH) / 2 (EPS) = 750.
Edit [May 12, 1:03pm]: I begin to suspect the 182k number is wrong. Maybe 182 is one month of transactions? Other sources are saying on the order of $2.5 billion [4] per year in transaction fees.
=> https://www.coingecko.com/research/publications/blockchain-fee-earnings [4]
That's $625 million / quarter which would be 81.6 (34,000,000 * 1,500 / 625,000,000), which is much more reasonable.