There is little consensus so far about how to value cryptocurrencies.

6 reasons why it is hard to value cryptocurrencies

From decentralised ecosystems and diverse tokens to limited data and constant experimentation. Katalin Tischhauser, Head of Research at Sygnum, gives six reasons why valuing cryptocurrencies is like solving a puzzle.

This article is part of Sygnum’s Valuing crypto assets investment research report.

There is little consensus so far about how to value cryptocurrencies. This lack of understanding has also led to investors occasionally bidding up the prices of largely meritless tokens, such as a number of meme coins as well as tokens that claimed to have a utility but actually had none.

There are a number of reasons why it is difficult to value cryptocurrencies:

  1. Decentralised ecosystems represent entirely new business models, and the value creation and value accrual to the tokens is still poorly understood.

  2. The crypto market encompasses a disparate universe of different token types that require different valuation methods, and this creates further confusion.

  3. Most of the value of cryptocurrencies is premised on significant future growth, and valuing growth is typically difficult, as there are few tangible data points.

  4. Crypto assets often have various unique features that influence their value, making their valuation even more complex – at this point the understanding of the value of security, governance and utility is limited.

  5. Crypto assets allow entirely new models for incentive structures, funding growth and innovation and the distribution of the economics, and the industry is constantly experimenting with various new models, which further complicates the valuation.

  6. While there are data points that can be used as inputs for valuation models, the availability, accessibility and quality of data are further obstacles.


THE CHALLENGES OF VALUING CRYPTO ASSETS

THE CHALLENGES OF VALUING CRYPTO ASSETS

At Sygnum, Katalin manages investment funds and other investment products. Katalin has over 20 years' experience at Goldman Sachs, UBS Warburg, and other major investment banks in trading, sales, and investment research and has held startup board, CEO and advisor roles across a variety of sectors, with a focus on the blockchain space since 2015.

Disclaimer

This document is purely for educational purposes and has been issued by Sygnum Bank AG. It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a marketing communication. It does not constitute an offer or a recommendation to subscribe, purchase, sell or hold any security or financial instrument. It contains the opinions of Sygnum Bank AG, as at the date of issue. These opinions and the information contained herein do not take into account an individual‘s specific circumstances, objectives, or needs. No representation is made that any investment or strategy is suitable or appropriate to individual circumstances or that any investment or strategy constitutes personalised investment advice to any investor. Therefore, you must verify the above and all other information provided in the document or otherwise review it with your external advisors. Some investment products and services, including custody, may be subject to legal restrictions or may not be available worldwide on an unrestricted basis. The information and analysis contained herein are based on sources considered as reliable. Sygnum Bank AG uses its best efforts to ensure the timeliness, accuracy, and comprehensiveness of the information contained in this document. Nevertheless, all information indicated herein may change without notice.

Read next article

Local restrictions – Provision of cross-border services

It looks like you are using a computer with an IP address located outside of Switzerland.
If you are located in Switzerland, please click “Continue” to access the Sygnum Bank AG (Sygnum) website.

If you are not located in Switzerland, please read below.

This website and the information contained herein are addressed solely to persons residing or domiciled in Switzerland.

Sygnum is a regulated bank supervised by the Swiss Market Financial Authority (FINMA). The products and services on this website are authorised in Switzerland. Sygnum cannot promote its products and services in other countries where it is not authorised by the supervisory authority of that country to do so.

If you click on “Continue” to visit this website, you confirm that you have read and understood the above and you are visiting this website on your own initiative without any active promotion or solicitation from Sygnum.

Investor qualification

The following content is available to qualified investors. Please confirm your details below to visit this page, or please see our other digital asset updates here.

Security alert

Stay alert to fraudulent communications. Sygnum will never post messages on social media or private messaging applications regarding e-banking access or logins. If you have concerns, contact us.

Close