Valuation report - understanding

How to forecast crypto growth: 3 key pillars of addressable markets

Valuing crypto assets relies on accurately forecasting growth, and understanding the market size is crucial for this. In this regard, we have identified three key pillars of addressable markets that help assess growth potential and navigate market size forecasting.

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

How to forecast growth

Crypto assets represent investments in early-stage transformational technology where the

opportunity lies in medium- to long-term growth.

Any valuation methodology ultimately hinges on forecasting this growth. Assessing the fair value of tokens also involves modelling how projects capture value and how this value is transferred to tokenholders, but the starting point in all cases is understanding the size of the opportunity.

Addressable markets

As with valuing traditional businesses, assessing the size of the addressable market is the first point of reference for valuations.

For example, a decentralised exchange that trades crypto assets will see its market grow as:

1. The crypto market grows in size.

2. The preference for decentralised exchanges over centralised exchanges increases.

3. Traditional financial assets are tokenised and traded on crypto exchanges.

Forecasts by various research and consulting organisations provide reference points to establish a reasonable range (best/worst-case scenarios) of what the size of the market may be. The below example of cross-border payment flows is one component of assessing the size of the global payments market, which in turn is a starting point for assessing the potential for cryptocurrencies in payments as well as for projects and decentralised applications that facilitate digital payments.

GLOBAL CROSS-BORDER PAYMENTS FLOWS (USD TR)

GLOBAL CROSS-BORDER PAYMENTS FLOWS  (USD TR)

As the crypto industry creates new markets, the uncertainties around forecasting the market size can be significant. But parallels can still be drawn by looking at what service or activity the new market might displace or most closely resemble.

When crypto businesses aim to take market share from traditional counterparts, this may be by offering a lower cost alternative or a more focused solution that better serves a need.

Fabian Dori Quote

Disclaimer

This document is purely for educational purposes and has been issued by Sygnum Group. 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 Group, 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 personalized 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 Group 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.

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