Crypto Valuations

[CryptoTC]

Per the front page article I just read, there are many ways to assign value to a crypto. In my opinion it boils down to really just 2 questions-is there a use for a coin or token and what do buyers think that use is worth?

The current frothy crypto market ignores what few fundamentals there really are. If the crypto space expects to become legit and attract Wall Street, the cream needs to rise to the top while the pure speculation coins fade away.

What say you fellow crypto buyers or sellers?

 

[Old Man Crypto]

How can any crypto have fundamentals though. None of them sell anything or make any products. Kinda hard to say what something is worth if there’s no product sale to base things on. Bitcoin could be worth more if more people decide they want to buy it. Ethereum could go up if more apps are running on it. But what about all the others. Are they really worth anything really? What’s NEM worth to use? What’s stellar worth to use? Will any of them be used? Will anouther company buy them and would that change anything for people who own the coins?

 

[The CC Forums]

How can any crypto have fundamentals though. None of them sell anything or make any products. Kinda hard to say what something is worth if there’s no product sale to base things on. Bitcoin could be worth more if more people decide they want to buy it. Ethereum could go up if more apps are running on it. But what about all the others. Are they really worth anything really? What’s NEM worth to use? What’s stellar worth to use? Will any of them be used? Will anouther company buy them and would that change anything for people who own the coins?

Be sure to check out the thread I created on references covering valuations:

Cryptoassets, Burniske and Tatar

It would be hard to consider pure crypto projects as takeover targets. There is no voting right with owning tokens or coins, so no one can buy a majority of a coin and then take over the "company." You really are buying a piece of a network when you buy cryptos. We all know that market capitalization is the most quoted way to compare values of each blockchain project, but it's just an arbitrary number fully dependent on what the market says a coin is worth.

I still predict a vicious market consolidation is coming where only coins or tokens that can transition to regular use will survive. We've got several coins competing for the decentralized file storage market, but I'm skeptical that any of them will be able to compete with Microsoft, Google, Amazon, Apple and so on. I understand the benefits of decentralization vs centralized control and points of failure, but I'm not sure the average person backing up her PC or phone will ever care about that. Especially if she has to buy tokens on an exchange to use on the blockchain network to store data.

The real value will be in public record storage such as land records, property ownership, ID verifications, etc. This is just one example of course.

Only a handful of cryptos will ever have a chance to become a global financial transactional currency. Speed, cost, availability and acceptance will decide which ones will make it. Maybe a serious fiat competitor has yet to be developed, or maybe it's bitcoin, the first to be created. I think it will take another 8-10 years for mainstream consumers in developed countries to be able and willing to pay with cryptocurrency.

So how do you value any of these? Many crypto investors will look at the total market value of some business segment and then make the argument that "if coin <X> can get 5% of this market, it will be worth billions!" It isn't a valid method of valuation. No one knows what percentage of these markets that blockchain can capture.

So this is a long answer to basically say I have no idea what valuation model(s) to apply to cryptocurrencies. A network platform coin can have value if dApps are created and become popular. I guess CryptoKitties is an early example.

We are very early in this technology cycle. Perhaps the most valuable blockchain products have yet to be created.

Thanks for the great question. I'm hoping others will join in this conversation. It's a core crypto and blockchain question.

 

[Old Man Crypto]

So value will come from use. I get that. But a lot of cryptos will never be used. Many have market values in the hundreds of millions even with nobody using the coin to do anything. You’d think the market would figure that out but it’s been that way for 5 years or more. And all the new ICOs just made it worse.

What’s a coin worth if it’s used to record the history of home ownerships? The blockchain gets created, records get stored on nodes running around the world and then somebody wants to look up something. Do they buy a coin and “spend” it to check out whether their house can be bought without a bad history? Do the miners running nodes compete for looking that up to win coins? Then what? Sell them on an exchange?

How can we decide how much that’s worth on an exchange selling cryptos if buyers can’t use it to look up records?

A lot to figure out here still. I always wondered how Facebook or Twitter had value, and I was way off on those so I’m probably missing something here too. Hoping someone will tell me what that is.

 

[Old Man Crypto]

I was hoping some of the other posters with maybe more experience could help with this question. It’s not something I see much on other sites and I don’t have a great understanding of how to decide what Ethereum is worth for example. A lot say it will be worth a lot more but that isn’t explaining where the value comes from.

Anyone able to give advice?