Last Update: Oct 31, 2024

Fan Tokens in the Moxie ecosystem are gaining traction, offering both financial returns and non-monetary benefits like exclusive content and deeper engagement. With over 100% growth in TVL in September 2024, the protocol is growing fast.

Yet, with only 5.2K Fan Token holders compared to 90K MOXIE holders, there’s significant upside potential. Additionally, 53K wallets received a MOXIE airdrop with vesting over 180 days, meaning many users are currently letting their tokens sit idle in vesting contracts. This could be a financially inefficient approach, as those tokens could be invested in Fan Tokens to generate surplus profit. As more users realize this, participation in the Fan Token economy is expected to rise.

At the heart of this economy is the buy & burn mechanism, which drives price appreciation by pushing token prices higher during buy events, while keeping supply stable after burn events. But price alone isn’t everything. Fan Token valuation is also influenced by community engagement and overall market trends. Whether Fan Tokens are a smart investment for you will come down to how well you balance financial returns with the unique, non-monetary benefits they offer.

By the end of this article, you’ll have a deeper understanding of some of the critical variables that drive Fan Token value, including buy & burn cycles and Total Value Locked (TVL)—both of which contribute to a token’s financial performance and broader influence.

And here’s the key takeaway: whether the price of the Fan Tokens has gone up or down recently doesn’t matter. There’s something far more important to focus on—the fundamentals.

Why Should This Matter to You?
Take my own experience, for example. I didn’t have the best start—airdrop rank 1,286 and a FarScore of 0.18, I missed out on the early profitable auctions and even had to cut my losses in the next rounds. But once I focused on evaluating tokens with the P/E Ratio and ignoring short-term price movements, things turned around.

I’m now ranked 30th in realized + unrealized profit, not because I chased price trends, but because I stuck to fundamentals. And that’s what I want to emphasize: when it comes to Fan Tokens, long-term value often wins over short-term price shifts.

By paying attention to the P/E Ratio, you may be able to identify the hidden gems.

Introduction: Should You Invest in Fan Tokens?

As Fan Tokens grow within the Moxie ecosystem, the question arises: Should you invest in Fan Tokens? The answer depends on how you balance financial returns and non-monetary benefits. Fan Tokens not only provide the potential for price appreciation, but they also give access to unique features, allow for deeper community engagement, and improve your standing within the Moxie ecosystem through metrics like FarBoost and MoxiePower.

One important principle: If the financial and non-financial benefits you receive outweigh the risk of MOXIE’s price fluctuations, then participating in the Fan Token market can be a smart strategy. This article aims to show you how to assess that balance.

Key Variables in Fan Token Valuation

Fan Tokens are influenced by a mix of financial metrics and community-driven factors. It’s important to understand the different elements that contribute to a token's overall value:

1. Non-Monetary Benefits

Fan Tokens aren’t just about making money. They offer holders access to exclusive content, features, and events.

2. TVL (Total Value Locked)

The Total Value Locked (TVL) reflects the amount of MOXIE locked in a Fan Token. A higher TVL indicates more capital is committed to the token, which can signal financial confidence and stability. However, a lower TVL may suggest greater growth potential, as there’s more room for price appreciation when buy & burn cycles occur.

As of now, 564 million MOXIE($1.32M) has been locked into Fan Tokens—a clear indication of strong participation in the ecosystem.

3. Expected Buy & Burn Activity

Fan Tokens go through buy & burn cycles, where MOXIE earned from engagements is used to buy tokens, driving the price up. Afterward, the burn event reduces the token supply to its pre-buy level, keeping the price stable while lowering the supply. This mechanism steadily increases token prices without diluting the holders' shares.

These buy & burn cycles play a major role in driving price appreciation, especially for tokens with strong daily earnings.

4. Community and Trust

A token’s value is largely influenced by the strength of its community. Tokens with active and engaged communities tend to retain their value and see steady growth over time.

5. Boosted FarScore

Holding and locking Fan Tokens can boost your FarBoost and MoxiePower, increasing your ability to reward others and potentially influencing your earnings indirectly. This added utility makes Fan Tokens attractive beyond simple price speculation.

6. MoxiePower and Locked Tokens

MoxiePower allows users to lock their Fan Tokens with a lock period of 3 months (or more). This has become an important factor in price stability, as the higher the percentage of locked tokens, the less likely it is for a token’s price to fall drastically.

Mastering the P/E Ratio for Fan Tokens

A key to successful Fan Token trading is understanding and applying the Price-to-Earnings (P/E) ratio. This simple but powerful metric helps determine whether a token is undervalued or overvalued by comparing its Total Value Locked (TVL) to its earnings shared with fans (post-split earnings).

What is the P/E Ratio?

The P/E ratio is one of the most trusted metrics in financial markets, heavily relied upon by institutional investors and traders for asset valuation.

The P/E ratio is calculated as:

• P/E Ratio = TVL ÷ Earnings Shared with Fans (Post-split Earnings)

The TVL represents the amount of MOXIE locked in a specific Fan Token, while post-split earnings reflect the portion of total earnings shared with token holders.

Pre-Split vs. Post-Split Earnings: A Key Difference

• Pre-split earnings represent the total revenue generated from engagements (casts, frames, etc.).

• Post-split earnings are what is shared with Fan Token holders, after the creator, network, or channel takes their cut. For example, if a creator has earned 1,000 MOXIE, and 20% is allocated to Fan Token holders, the post-split earnings for token holders would be 200 MOXIE.

These post-split earnings are critical because they reflect the actual earnings distributed to token holders and are key for calculating the P/E ratio. Read more about reward splits here.

How to Calculate P/E Ratio

To calculate the P/E ratio, follow these steps:

1. Access Airstack.xyz

2. Collect the Data

   • TVL: The total value of MOXIE locked in the Fan Token.

   • Rewards Shared with Fans (Post-split earnings): This includes today’s, 7-day, and all-time earnings shared with token holders.

     Do NOT use the TVL on the right sidebar. That value is pre-split ie. including earnings for creator, channel, and network.

3. Apply the P/E Ratio Formula:

   • P/E Ratio = TVL ÷ (Post-split earnings per 365 days)

   Example calculation using the data in the screenshot above based on 7-day data:

   • TVL = 5,816,604

   • 7D Reward for Fans = 175,212

   Formula:
   P/E = TVL ÷ (7D Reward for Fans ÷ 7 x 365)

   Substitute the values:
   P/E = 5,816,604 ÷ (175,212 ÷ 7 x 365) ≈ 0.64

This calculation shows you how much you’re paying for each unit of earnings. A lower P/E ratio indicates that the token may be undervalued relative to its earnings, offering room for price growth.

Interpreting and Applying the P/E Ratio for Trading

The P/E ratio gives you a clear picture of whether a token is undervalued or overvalued. Here’s how to interpret and apply it to your trading decisions:

Low P/E Ratio (Undervalued Tokens)

• Interpretation: A low P/E ratio indicates strong earnings relative to price, suggesting the token is undervalued and has growth potential.

• Application: Prioritize tokens with low P/E ratios for potential price appreciation through future buy & burn events, leading to higher long-term profits.

High P/E Ratio (Overvalued Tokens)

• Interpretation: A high P/E ratio signals that the token's price is inflated compared to its earnings, indicating overvaluation.

• Application: Consider reallocating funds from high P/E tokens, as they may not offer as much return unless earnings catch up.

Case Study 1: Applying the P/E Ratio to Actual Fan Token Data (Sep 17, 2024)

Let’s walk through an example using channel tokens. Channel tokens are unique in that they share 100% of their pre-split earnings with fans through the buy & burn mechanism.

Here’s a comparison of five channel tokens, with their respective TVL, 7-day reward shared with fans, and P/E ratio:

From the data, /superrare has the lowest P/E ratio at 0.26, which suggests it is the most undervalued channel token among the five, from a P/E ratio perspective. This indicates a higher potential for price appreciation based on its current earnings.

On the other hand, /success and /airstack have the highest P/E ratios, at 0.70 and 0.52 respectively. While this could hint at overvaluation, both channels offer unique non-monetary benefits—such as exclusive content and strong community engagement—which means that despite a higher P/E ratio, they could still offer significant value beyond the financial metrics alone.

Case Study 2: P/E Ratio vs. Price Performance After 25 Days (Oct 28, 2024)

In addition to comparing individual channel token P/E Ratios, I tracked the relationship between P/E Ratios and price growth across a broader set of tokens. Using data from October 3, I analyzed P/E Ratios and corresponding price changes over the following 25 days.

Here’s what stood out:

• Tokens with lower P/E Ratios generally showed more significant price growth, following a clear downward trend in returns for tokens with higher P/E Ratios.

• This trendline reflects a strong positive correlation between low P/E Ratios and potential price appreciation.

While no single metric can guarantee price predictions, the data supports the case for focusing on low P/E Fan Tokens as a promising starting point. This reinforces the idea that tokens with lower P/E Ratios could offer stronger potential returns, aligning with the insights from Case Study 1.

Case Study 3: The Rise of Low-Cap Fan Tokens with Moxie Heroes (Nov 3, 2024)

Since the launch of Moxie Heroes, I've noticed a strong performance shift in low-cap Fan Tokens. To confirm this, I analyzed recent data, and the results back up my impression.

One likely reason for this surge is that low-cap tokens have significantly improved P/E Ratios—meaning they’re earning more than before relative to their market value. This enhanced earning potential has made them particularly attractive, especially for investors on a tighter budget or those willing to dive deeper to find hidden value. While the bonding curve makes large investments in low-caps challenging, the growth potential here shouldn't be overlooked.

This case study shows that with the right approach, low-cap Fan Tokens might offer a rewarding path, particularly now that they’re achieving stronger returns.

Portfolio Diversification

Building a balanced portfolio of Fan Tokens is essential to managing risk. By spreading your investments across high-risk, high-reward tokens and more stable options, you can maximize growth potential while mitigating downside risks.

How to Balance Your Portfolio

• Stable Tokens: Invest in network tokens or well-established channels that have higher TVL and consistent earnings. These are less volatile but provide slower, steady returns.

• High-Growth Tokens: Allocate a portion of your portfolio to user tokens or smaller channels that might be more volatile but offer higher upside if they gain traction.

  The 10 most profitable users either make most of their profit from the Farcaster Network (or /airstack) token, or have invested in 100+ tokens. (Sep 17, 2024)

Strategic Holding vs. Short-Term Flipping: When to Stay, When to Exit

Should you hold Fan Tokens for the long term or flip them for short-term gains? It all depends on how well you execute your strategy and what your goals are.

Long-Term Holding

Tokens with steady buy & burn activity and strong earnings can be great for long-term holding. Over time, buy & burn cycles increase the token price. This makes long-term holding a solid strategy for capturing price appreciation, especially when you pick the right tokens with strong fundamentals.

Short-Term Flipping

Short-term flipping can also be highly rewarding if you time it right. When a token’s P/E ratio spikes and the price outpaces its earnings, it could be an ideal opportunity to sell for a quick profit. However, frequent flipping carries more risk due to market volatility and the 5% sell tax, making it a high-risk, high-reward play. Flipping requires careful timing and a solid understanding of the market to make it work.

Key takeaway:

Both strategies have their place. Short-term flipping offers higher potential returns but comes with increased risk, while long-term holding can be equally profitable if you focus on the right tokens. It's all about finding the strategy that suits your style and level of risk tolerance.

Success Stories

1. Case 1: Undervalued Tokens Skyrocket

   Some channel tokens skyrocketed in the past week. Was that predictable? Surprisingly, to some extent, yes.

   

   In a recent analysis of 9 high-TVL channels, there was a clear correlation between the P/E Ratio on September 10 and price growth over the following 7 days. The channel token with the lowest P/E Ratio experienced a 73% price jump, while the token with the highest P/E Ratio barely moved, growing only 6%.

   

   

   • Key takeaway: Forget the short-term price action; what really matters is whether a token looks undervalued based on its fundamentals.

2. Case 2: The Reward Split Boost

   

   On September 3, 2024, @investanything increased his reward split from the default 20% to 90%. The results were staggering—a 192% price surge over 14 days. TVL jumped from 43K to 1.28M, and the price rocketed from 59 to 172, with a daily compounding increase of 8%.

   • Key takeaway: A reward split increase doesn’t guarantee success, but it can significantly improve the P/E Ratio, creating an opportunity for tokens to become undervalued. Keep an eye out.

Watch Out: Risks to Consider

• Overpriced Auctions—The Big Sell-Off

  Ever see an auction go sky-high, only to watch the price plummet right after? That’s what happens when the auction clears with an overvalued price. After the bidding war cools, a mass sell-off often follows.

  • Key lesson: Don’t get swept up in the auction fever. Stick to your budget, conduct P/E analysis, and pay close attention to how others are bidding.

• Concentrated Holders—A Recipe for Disaster

  

  Example: Two users held 90% of the token above. One sold, then the other followed. The result? A 50% price drop in no time.

  • Key lesson: Beware of tokens dominated by a small number of holders. When they sell, the token’s value can take a nosedive—and fast.

• Inactive Users and Channels

  Buying a token based on long-period earnings data? You might miss that the user or channel has gone inactive. If you invest without checking recent activity, you could find yourself stuck.

  • Key lesson: Always check both recent and long-term activity. That way, you’ll know if the token still has the potential for steady earnings.

• Low TVL—Big Price Impact

  Own a significant chunk of a low-TVL token? Selling it could cause your selling price to drop way lower than you expect, hurting your realized profit.

  • Example:

    • [Before] TVL = 7,317, holdings % = 99.1%, holdings value = 9,272

    • [After] TVL = 20, avg. sell value = 7,462, received value = 7,089

  • Key lesson: Make sure the TVL and your holdings % are balanced so you can take profits without being hurt by price impact.

• Sudden Reward Split Changes

  

  Reward splits can change at any time, and it’s the token creator’s full right to adjust them as they see fit. However, these changes can impact the token’s value, and a lower split might leave those who bought at a higher percentage holding an overvalued token.

  • Key lesson: Be cautious when investing based on a reward split increase. Study the token creator’s behavior, as higher splits may signal undervaluation, but timing is crucial—by the time you buy, the price could already reflect the change.

Personal Take: Calculating Risk vs. Reward

As long as your TVL is growing faster than any potential drop in the $MOXIE price, you’re likely seeing a profit. A useful way to measure this is by looking at the Compound Daily Growth Rate (CDGR)—which shows the daily rate at which your investment grows, compounded over time. One way to check your porfolio growth is using @degenfans's frame.

Let’s do some quick ROI(Return-on-Investment) calculations, one bullish and one bearish. Here are two scenarios:

1. Bullish Scenario: Fan Token TVL rises 1.5% each day, and MOXIE price increases by 1%. This gives a combined CDGR of =~2.5%, which results in:

   • 30 days: +110%

   • 90 days: +823%

   • 365 days: +820,650% (APY)

2. Bearish Scenario: Fan Token TVL rises 1% daily, but MOXIE price drops by 0.5%, giving a CDGR of =~0.5%, resulting in:

   • 30 days: +16%

   • 90 days: +53%

   • 365 days: +517% (APY)

These figures don’t account for additional rewards or non-monetary benefits, such as engagement mining boosts and the fun factor of participating in the ecosystem. Keep in mind that the rate of return can fluctuate significantly based on the development of the ecosystem and market conditions. The price action of MOXIE is unpredictable and can experience extreme volatility, both up and down.

In the past 23 days, my portfolio has grown at a combined CDGR of over 5%. For me, investing in Fan Tokens makes perfect sense, especially with the added fun and daily rewards. However, this is my personal experience, and your results may vary. Ultimately, it’s up to you to weigh the risks and rewards based on your circumstances—and remember, never invest more than you’re comfortable losing.

The Road Ahead: What’s Coming for Fan Token Valuation

The Fan Token market is evolving fast (still only 50 days since launch!), and we’re about to see some major developments that could push things even further. Features like LP Boost, long-term staking (MoxiePower), and new partnerships are on the horizon, and they’re expected to drive future growth in big ways.

What to Watch For:

• Long-Term Staking(MoxiePower): Staking is getting serious. With a multiplier and no cap, holding tokens for the long haul is going to get even more rewarding. That’s bound to increase demand for Fan Tokens.

• Partner Integrations: Big names starting with Matcha, Rainbow, and Wildcard are jumping in, buying up MOXIE for marketing and user acquisition. That’s going to put even more pressure on demand and prices.

• Purchase Demands: As more people buy MOXIE to unlock exclusive features and perks, Fan Token demand will keep climbing, which should push prices higher too.

Conclusion: Building a Balanced Fan Token Strategy

Success in the Fan Token market isn’t about following just one approach. It’s about understanding key metrics like the P/E ratio, TVL, and buy & burn cycles, and then using them to make informed decisions. Whether you choose to flip for short-term gains or hold for long-term growth depends on your style, goals, and risk tolerance.

Key Takeaways:

• P/E Ratio and TVL: Use these metrics to spot tokens with strong growth potential and undervalued opportunities.

• Short-Term Flipping vs. Long-Term Holding: Both strategies can be profitable if executed properly. Flipping offers higher potential returns but with greater risk, while long-term holding can generate steady returns through buy & burn cycles.

• Diversification: A balanced portfolio that includes speculative and stable tokens can help reduce risk while capturing upside potential.

For a deeper dive into the Moxie ecosystem’s core mechanics and opportunities, don’t forget to check out my Ultimate Moxie Q&A.

Ultimately, there’s no one-size-fits-all strategy. The best approach is the one that fits your goals and your tolerance for risk. Evaluate both financial and non-financial benefits, and as always, don’t invest more than you can afford to lose.

Happy Moxie! 😄

Made with love by @Fibo112358.eth (scryptoguy)

Comment from Author:

After spending 100+ hours, investigating and experiencing fan token trading, I’ve published my second article, following the Ultimate Q&A. This time, I’m sharing a strategy centered around the "P/E Ratio" that might just be the key to unlocking a more effective approach to fan token investments.

I’m really passionate about Moxie, but I know there are challenges ahead to get more people enjoying it like I do. With this article, I hope to strengthen your confidence in fan token investments, which offer both financial and non-financial rewards. The strategy is something I’ve used myself, and I believe in the long-term potential we all can achieve together.

Disclaimer:

While this article focuses on the importance of buy & burn mechanics and market cap (TVL), it acknowledges that Fan Token value is not solely driven by these factors. Community engagement, non-monetary benefits, and long-term potential play critical roles in determining the true value of Fan Tokens. This article aims to provide strategies for financial evaluation but does not suggest that Fan Tokens should be traded purely for speculative gains. Traders should consider the holistic value of the token, especially in small communities like Moxie, where speculation is not encouraged.