Many investors treat a DCF as a definitive measure of an asset's worth, but it's really your opinion lmao A DCF is simply a reflection of the current sentiment (because most analysts follow social consensus to keep their jobs anyway) and an estimate of value based on a set of assumptions. Since the market is always forward looking, its pricing is based on what could happen in the future. Your time is better spent trying to understand that future. A DCF model is effective to determine if the price you are paying today is reasonable or if you are potentially late to a trade. If you correctly predict the long term direction of an asset, you will eventually make money, even if your entry point isn't perfect. However, a poor entry can mean you waste a significant amount of time waiting for the investment to become profitable. The Hidden Flaw: Distinguishing Hype from Health The critical question is not just about the current price, but whether an asset's value can be sustained long into the future. This is a question a standard DCF model cannot answer. For example, some analysts who focused strictly on DCF models for Ethereum were initially unimpressed because Solana was generating enormous revenue during the peak of its pump-driven ecosystem. The problem was that Solana's cash flows at the time were not durable, which meant its terminal value was also not durable. Many Ethereum proponents were frustrated because these financial models failed to account for the durability of the network. This exposed a key weakness. You can only trust a terminal value calculation if you believe the asset will last into perpetuity, which is a very bold assumption for almost any business, let alone a crypto protocol. Considering how many alternative Layer 1 and Layer 2 solutions have already failed, can you confidently say your favorite chain will still be dominant in a few years? Adopt a Product Analytics Mindset The core challenge of using DCF in crypto is that the model requires stable and forecastable cash flows. The volatile and rapidly evolving nature of the crypto market makes this almost impossible to achieve with any real accuracy. I strongly believe the solution is not to build more complex financial models, but to adopt a product analytics mindset. This approach allows you to assess the fundamental health of the chain or protocol itself. You can gain a significant edge by thinking this way, especially over investors who rely solely on TradFi methods. You must remember that a chain’s revenue and cash flow ultimately come from its users. How User Metrics Reveal a Protocol’s True Value Instead of getting lost in financial forecasts, you should focus on estimating a protocol's competitive moat and its durability. You can achieve this by applying a product analytics focused lens to your analysis. By tracking whether users are genuinely adopting and sticking with a protocol, you get a much clearer signal of its long term health. This is because a growing and engaged user base is the most reliable source of sustainable cash flow. When you track user behavior, you connect your valuation to a real world outcome. This gives you the ability to make a more informed judgment about the protocol’s terminal value and helps you see what a spreadsheet alone never will.

Verbalized via Dictation, then did a quick clean up with an AI. Just wanna dump my thoughts haha