Crypto-asset Valuation: A Review and Analysis of Current Methods

Chen Liu

Chapter 9 in Cryptofinance:A New Currency for a New Economy, 2021, pp 171-190 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter provides an overview of crypto-asset valuation methods. Specifically, the chapter positions existing crypto-asset valuation methods and techniques within the framework of traditional asset valuation with a particular focus on the income approach, market approach, and cost approach. This income approach considers crypto-assets’ features of medium of exchange and storage of value and applies the Quantity Theory of Money, the Crypto J-Curve, the Network Model, and Metcalfe’s Law to crypto-asset valuations. The market approach ensembles the price/earnings ratio for the equity market and emphasizes the transaction value and token utilities, with the Network Value-to-Transaction Ratio and the Price-to-Utility Ratio. Finally, the cost approach considers mining costs as the lower bound of crypto-asset valuation. This chapter also discusses empirical tests and related studies with each valuation method. For each valuation framework, this chapter discusses its shortcomings and suggests future research directions.

Keywords: Cryptocurrencies; Digital Currencies; Bitcoin; Blockchain; Fintech; Tokenization; BitLicense; Crypto-Asset (search for similar items in EconPapers)
JEL-codes: G1 G11 (search for similar items in EconPapers)
Date: 2021
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