Investment in cryptocurrencies has increased over the years, leading to many people’s crypto space participation. Nowadays, there is a greater realization of the need to earn passive income than ever before. However, many would-be investors face a daunting task in choosing the platform to invest in. This is due to a lack of detailed analytic data on the performance of different cryptocurrencies.
Therefore Token Terminal intervened with its innovative solution. It aims to provide accurate and up-to-date information on the performance of different cryptocurrencies by using metrics. To better understand and appreciate the contribution of Token Terminal to the crypto world, let’s focus for a moment on the problems it aims to solve.
Nature of problems
There were no clear fundamentals for valuing protocols in the past, which investors and users could access easily. As a result, there has been a slow adoption of cryptocurrency, especially by institutions. This is because individuals and entities want to assess the performance of tradable assets before investing. This situation is different in the traditional financial sector, where many metrics are used to analyze investment opportunities.
The other problem relates to the prevalent misconception that tokens are non-product assets. Many investors consider tokens as assets used for a speculative purpose. As you note, some people do not understand how cryptocurrencies capture value. The only way to understand the value created by tokens is to compare their performance in the market to the traditional investment tools such as shares and bonds.
There is only one way to achieve this. It is through using metrics to evaluate the performance of individual tokens. That is where Token Terminal comes in to provide metrics that the public and investors can access easily.
How it works
The fact is that protocols work in the same way as traditional investment markets. Yet, there is the use of various financial metrics to evaluate each investment asset’s performance, such as bonds, shares, and debentures in the traditional investment marketplace.
In the same way, existing financial metrics are adopted by Token Terminal to evaluate the performance of crypto assets. Metrics help crypto investors to understand the value of the different tokens or cryptocurrency. The main metrics that Token Terminal uses are Gross Merchandise Value (GMV), Token Trading Volume, Market Capitalisation (market cap), and Price-to-Sales Ratio.
Token Terminal presents these metrics in its reviews in the form of charts. It does this through week to week metrics, which investors can easily access. Apart from this, Token Terminal provides an investment calculator, which investors can use to calculate returns on selected crypto assets.
Now we have to look at some metrics used by Token Terminal. It is using metrics that are used in analyzing traditional financial investments. One metric used by Token Terminal is market capitalization, commonly referred to as a market cap. It measures the relative size of a token. It is obtained by multiplying the token’s current market price by the total number of the token in circulation. The higher the market cap, the better the token is performing.
The other metric is the Gross Merchandise Volume (GMV). This is a measure of the total value of a token-passing through a protocol within a period. As you can see, this metric shows the demand of the token on the market. The higher the GMV, the more the demand for the token.
Price-to-Sales Ratio is another metric used by Token Terminal. This metric compares the price of the token to the revenue it generates within a period. This ratio shows how many investors are willing to pay for a token. This is one of the critical evaluation tools used by investors.
The fact of the matter is that Token Terminal has come up with valuable tools that investors have been longing for for a very long time. With the metrics, investors can make the best investment decisions.