Making Sense of Crypto Valuations – Hacker Noon


When meeting with sophisticated and institutional investors there are a few things I noticed keeping them on the sidelines. Their concerns range from a lack of clear regulation coming from Washington, to a shortage of SEC-regulated, secure, custody solutions. The good news is each of these issues are gradually being resolved. Crypto regulation is slowly becoming clear. Though cautious, US regulators are shaping their stance. Security storage solutions have improved vastly . This approach breaks down price into two components: 1) the ‘current utility value,’ (CUV) and 2) its ‘expected or future utility value’ (DEUV) and !

Wrap up

Although more work is being done on how to value cryptocurrency, Burnski’s adaptation of the J-curve does a great job at explaining value fluctuations of crypto. In today’s market, most people[2] are buying crypto with the expectation that it will be worth more in the future. As a result, the entire market is mostly speculative so there is still just a little CUV really incorporated into the price at any stage of the J-curve. That being said, the utility value is quickly growing. For instance, Bitcoin (and many others) is continually improving their protocols, as we have seen with Bitcoin SegWit[3]. As other digital assets are also able to improve, demonstrate utility, and meeting investor expectations, digital assets will continue to gain steam. The question for investors is how best to capture this value? Given the current large speculative content in the price of crypto we think a passive Index Fund is the best way to harvest the upside. Contact us here to learn more about the our methodology and index funds.

Originally published at on June 22, 2018.

[1] You can think about the DEUV in terms of if that token is adopted in the future as a replacement for gold, remittances, file storage etc., what is the expected utility value of that token in 2025. You then discount the price back to the present and that is the expected utility value or the DEUV.

[2] The current buyers is largely composed by retail investors, whose unsophistication leads to higher volatility and emotion in the market.

[3] A protocol upgrade that enables a greater number of transactions in bitcoin’s blocks.

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