Email of the day on valuing cryptocurrencies
Comment of the Day

November 20 2020

Commentary by Eoin Treacy

Email of the day on valuing cryptocurrencies

With Bitcoin and Ethereum continuing to impress price wise, how do you think about Valuation of these instruments? Though you’re a Technician you clearly have a great understanding of valuation at the same time. With regards to these instruments though I have never read a compelling valuation argument. I couldn’t tell you whether Bitcoin should be worth $500/$5,000 or even $50,000. What framework do you use to determine real value, or can you refer me to something of substance that you might have read?

Eoin Treacy's view

Thank you for this question. At present cryptocurrencies do not pay dividends so they do not submit readily to traditional dividend discount models. That may change with Ethereum’s transition to a proof of stake model which anticipates making interest payments. At that stage a traditional value model will be possible but whether it is relevant to the price structure is unknowable at present. 

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