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Cryptoasset Valuation : Identifying the variables of analysis

Since the launch of initial coin offerings (ICOs, also known as ‘token sales’) over the past few years, the issue of developing valuation methodologies that can accurately reflect the future of a token’s price has become a subject of increasing debate. While some experts have attempted to retrofit known financial models to cryptoasset valuation in the hope of creating accurate token price prediction models, many others acknowledge that the hybrid nature of most tokens makes their valuation an intrinsically difficult problem.

Focusing on valuation basics, the purpose of this report is to identify the set of variables that are the most likely to impact and drive a cryptoasset’s valuation. Having conducted extensive research, we provide the reader with a list of variables that need to be considered when analysing a token project. Readers of this report who are interested in developing a valuation methodology must realise that there is currently no universal token valuation method. Instead, we recommend following a modular approach in which key variables and analytical methods need to be selected based on the kind of token or cryptoasset that needs to be evaluated. As most ICOs are still in a phase of development, we currently lack the necessary data to test such models. But by reviewing the models being currently used, and by identifying the variables that are key to understanding the feasibility of a token project, it is our goal to set the stage for building sound and solid token valuation methodologies and frameworks in the future.

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