Read Valuation of Cryptoassets: A Guide for Investment Professionals by Urav Soni and Rhodri Preece, CFA, from CFA Institute Research and Policy Center for more information on crypto valuation. Franklin J. Parker, CFA, is respectfully asking for experts to provide insight on how to make buy and sell decisions in a cryptocurrency portfolio. Traditional valuation methods do not apply to bitcoin due to its lack of traditional asset characteristics such as generating cash flows or paying dividends. The valuation of bitcoin can be explored through four different methods.
First, comparing bitcoin with other assets like gold and analyzing their market capitalization can offer valuable insights. Second, analyzing the production costs of bitcoin can help determine if it is undervalued. Next, considering the impact of the US dollar’s monetary policies on the valuation of bitcoin can provide a clearer picture. Finally, examining the conviction of long-term versus short-term bitcoin holders can offer clues about the cryptocurrency’s value.
These unconventional valuation methods may offer a way to move forward in understanding the worth of bitcoin. The outputs and outcomes may vary, but innovation and transformative technologies have always been difficult to value. Crypto may bring about revolutionary changes or it may not, only time will tell. For further insights, read Valuation of Cryptoassets: A Guide for Investment Professionals by Urav Soni and Rhodri Preece, CFA, from CFA Institute Research and Policy Center.
