Valuation models
the work in progress
Cryptoassets can have several functions and business models. In particular, the main functions for the valuation are a store of value and a medium of exchange (unit of measure seems to be of secondary importance). Business models can be currency (digital exchange), utility token (a token facilitating the network), a security token (essentially, equity of the network), a discount token, etc.
I would argue that a coin has two parts of the value. One is short-term speculative, perhaps momentum like, which is based on number of daily transactions. Another part is a long-term, value like, which is related to a number of users via Metcalfe's law.
Main references
- 2019
Modeling Bitcoin's Value with Scarcity
- 2018
The Sheer Nonsense of the Quantity Theory of Money
A TON of Grams - RNV - Investment Case and a progress on The Next Step in Cryptoasset Valuation
- 2017
a good article with basic examples Valuing Cryptoassets from the Ground Up by Mike Sall
If the equation holds up, it suggests that commoditized cryptoassets could form a utility foundation for a new kind of industry.
Cryptoasset Valuations by Chris Burniske (Sept 2017) applying the quantity theory of money
Valuing Bitcoin and Ethereum with Metcalfe’s Law
Valuing Crypto Assets Luigi D’Onorio Demeo and Christopher Young. Three approaches, 1) cost of production, 2) equation of exchange and 3) network value.
On Value, Velocity and Monetary Theory by Alex Evans (Jan 2018)
Aaron Brown When Picking Cryptocurrency Winners, Don't Think Long Term
Aaron Brown To Value Bitcoin Now, Think Back to Internet Startups
A Tool for Making Sense of the Cryptocurrency Markets
The Bitcoin Boom: Asset, Currency, Commodity or Collectible? Aswath Damodaran (Oct 2017)
An (Institutional) Investor’s Take on Cryptoassets a clear view for utility (based on the quantity theory of money) and cryptocurrency (absolute digital gold)
Rethinking Network Value to Transactions (NVT) Ratio
Vitalik Buterin On Medium-of-Exchange Token Valuations Oct 17, 2017 auctioning is not stable? what are the alternatives?
Light literature
Is Bitcoin In A Bubble? Check The NVT Ratio by Willy Woo (Sept 2017)
Today’s Crypto Asset Valuation Frameworks March 2018
The Quantity Theory of Money for Tokens
Valuing Bitcoin and Ethereum with Metcalfe’s Law
Valuation for conventional firms
Context, Inputs, and Techniques for Valuing Cryptocurrencies as well as
Valuation Models for Cryptocurrencies by Phil Glazer
Academic literature
Initial Coin Offerings and the Value of Crypto Tokens in SSRN. ... by revealing key aspects of consumer demand, crypto tokens may increase entrepreneurial returns beyond what can be achieved through traditional equity financing. ... Crypto tokens can also facilitate coordination among stakeholders within digital ecosystems when network effects are present.
Be aware of Futility Tokens
Cryptocurrencies
Cryptocurrencies provide a medium of exchange. They share some features of fiat currencies, some are different. They are scarce, tamper-free, fungible. Yet, unlike real currencies, they are not, and never have been tied to a real-world asset, except the amount of energy or other resources (amount of code written) needed to validate transactions or "mine" new coins. Is that sufficient to construct a valuation model?
Other shortcuts:
- Relate the coin market cap to the total value of gold, or total volume of fiat currencies