The event of digital monetary belongings has essentially modified the monetary ecosystem, difficult conventional valuation methodologies and introducing new complexities for each analysts and traders. Digital belongings — which embrace cryptocurrencies, stablecoins, non-fungible tokens (NFTs), and tokenized securities — at the moment are utilized in enterprise transactions, funding portfolios, and capital formation. Even with their rising use, valuation stays clouded with uncertainty as a result of absence of standardized valuation frameworks and strategies, a market infrastructure that’s typically fragmented, and restricted technological transparency.
For monetary analysts, this evolution presents each a chance and a problem. Conventional valuation ideas nonetheless apply, however they should be tailored to a market the place observable inputs, governance buildings, and buying and selling conventions differ sharply from established asset courses. This put up explains method honest worth measurement for digital tokens underneath ASC 820 and IFRS 13, highlighting key areas {of professional} judgment corresponding to figuring out principal markets, figuring out exit costs, and assessing reductions for illiquidity or lock-ups. The dialogue is organized into 5 steps that mirror the valuation course of: from figuring out the token to figuring out its honest worth underneath various market and liquidity situations.
In contrast to conventional monetary belongings, many digital devices typically lack established market oversight, observable market inputs, or widespread and constant rights of possession. Tokenized securities could signify helpful pursuits in particular objective autos, fractional fairness, or artificial exposures, every with distinct authorized and financial implications.
Cryptocurrencies and NFTs, against this, are traded throughout decentralized exchanges with various levels of value transparency and custody threat, and will be inclined to manipulation. These elements complicate the appliance of established valuation strategies corresponding to these described in ASC 820 and IFRS 13 Honest Worth Measurements, which depend on market participant assumptions and observable inputs. These standards could also be absent or unreliable with digital belongings.
Even with these vital challenges, the normal valuation approaches nonetheless apply to the valuation of digital belongings. Tokens that generate money flows to their holder could lend themselves to the usage of a reduced money stream technique of valuation. Sure digital belongings are actively traded on sure exchanges, which can be helpful to supply inputs for relative valuation methodologies. Lastly, builders generally observe the prices to tokenize a safety, which will be helpful in making use of strategies of valuation underneath the associated fee method.
This put up explores the valuation challenges posed by digital belongings, with a give attention to honest worth measurement, marketability reductions, authorized construction, and technological threat. It proposes a structured method to valuation that integrates conventional monetary rules with rising practices in blockchain analytics and decentralized finance.
Via sensible examples and a methodological evaluation of tokens which might be traded on main digital exchanges corresponding to Coinbase and Binance, it goals to equip monetary analysts with the instruments essential to navigate the valuations inside this evolving asset class with rigor and readability, with a spotlight in the marketplace method.
Relying on buying and selling quantity and market traits, these tokens would usually qualify as Degree 1 or Degree 2 belongings underneath the ASC 820/IFRS 13 honest worth requirements. We conclude with some notes on Easy Settlement for Future Tokens (SAFTs) as a sort of contract (Degree 3) that’s changing into more and more widespread in token-based fund elevating as an alternative choice to precise token issuance for early-stage initiatives.
Step 1: Determine the Token You’re Valuing
As a primary step within the valuation course of, it’s important to determine the important thing technical options of the digital asset being valued. Some widespread sorts embrace:
- Cryptocurrencies (ex: Bitcoin, Ethereum, Solana). Cryptocurrencies usually have a devoted blockchain and are used for peer-to-peer funds.
- Stablecoins (ex: Theter’s USDT and USDC). Stablecoins are used as a step within the conversion of different digital tokens right into a fiat forex such because the US greenback or the Euro. They usually commerce at a value near par (1 USDT = 1 USD), however, equally to sure cash market funds, this parity shouldn’t be taken with no consideration, as it may possibly break in durations of market disruption and will have an effect on the proceeds at exit in an underlying digital token sale.
- Utility tokens (for instance, Ethereum’s Ether, Solana’s Chainlink). Utility tokens function above an underlying main blockchain. They might be used to pay for companies offered by the issuing platform (Service Tokens), train voting rights within the operations of the underlying enterprise (Authorities Tokens), or for quite a lot of different capabilities. They may be bought as an funding to realize publicity to the underlying platform. Whereas a token doesn’t present fairness participation rights, the traded value of a utility token will usually profit from progress made within the growth of the underlying platform’s marketing strategy and, extra typically, from enhancements within the underlying platform’s operations.
An understanding of the token’s technical options is important to evaluate the token’s threat profile, determine comparable tokens, and determine the drivers of provide and demand which finally decide the token’s market efficiency. Tokens that function on the identical blockchain could belong to totally different layers.
Native Layer-1 tokens are the first cryptocurrencies of unbiased blockchain networks, corresponding to Bitcoin (BTC) and Ethereum (ETH). Layer 2 tokens attempt to increase the capabilities of the underlying base layer community. Tokens on the identical blockchain may differ primarily based on their use of requirements. For example, Binance USD (BUSD) operates utilizing the ERC-20 normal on Ethereum, whereas NTFs usually use ERC-721.
Different vital options to think about embrace the full provide of tokens and variety of tokens in circulation, the traits of the preliminary coin providing, and the token’s regulatory background. The token’s whitepaper will present related info on the undertaking behind the token’s issuance and can assist determine its key technical options.
Step 2: Decide the Principal Market
Based on ASC 820 and IFRS 13, the honest worth of an asset ought to be measured primarily based on pricing info obtained from its “principal market,” outlined as “the market with the best quantity and degree of exercise for an asset or legal responsibility.” It’s common for digital tokens to commerce on a number of exchanges.
For instance, primarily based on info from Coinmarketcap (Exhibit 1), the highest 10 exchanges for the buying and selling of Ethereum embrace Binance, Bybit, Coinbase Trade, Upbit, OKX, Bitget, Gate, MexC and KuCoin. The reported costs differ in response to the alternate, in some circumstances considerably (UpBit at $4,148.91 versus the opposite exchanges within the vary $3,977.42 to $3,994.30).
In a valuation report, you will need to determine the reference alternate, and/or whether or not a composite value such because the “Shut” value reported by Coinmarketcap is used as a substitute.
Exhibit 1: Prime 10 Exchanges for Buying and selling Ethereum.
Supply: Coinmarketcap, October 29, 2025 10:11 a.m. EST.
Step 3: Determine the Exit Value
Beneath ASC 820 and IFRS 13, honest worth is supposed to replicate an “exit value,” specifically the value that will be acquired to promote an asset in an orderly transaction between market individuals on the measurement date. Cryptocurrencies commerce constantly and usually exhibit excessive intra-day volatility. Which cut-off date ought to we use to determine our exit value for the token on the valuation date?
In answering this query, analysts could wish to confer with any steerage offered in contractual agreements. For example, they might flip to the valuation coverage for an funding firm, a restricted partnership settlement, or a fund personal placement memorandum. Within the absence of a valuation coverage and contractual steerage, analysts could choose a valuation time, typically aligned with the token holder’s location. After selecting that cut-off date (e.g., 12 a.m. EST, 5 p.m. EST, 12 a.m. PST), analysts ought to use it constantly.
Alternatively, analysts could think about using the common day by day value (easy or volume-weighted) from a specified supply, the “shut value” per Coinmarketcap or one other information supplier, the value from a specific alternate, or the common of day by day excessive and low as reported by Coinmarketcap or one other pricing sources.
As analysts make the most of costs from crypto markets of their evaluation, you will need to remember that the decentralized nature of the marketplace for digital tokens makes them particularly liable to the danger of pricing manipulation. In October 2024, the US Securities and Trade Fee introduced fraud prices towards ZM Quant Funding Ltd. and sure different “market makers” for participating in schemes to govern the markets for varied crypto belongings being supplied and offered as securities to retail traders. The schemes had been allegedly meant to induce investor victims to buy the crypto belongings by creating the false look of an lively buying and selling marketplace for them.[1]
Within the cryptoasset markets, it’s typically the developer of a digital token platform (the “offeror”) who pays the market maker a month-to-month charge. A token offeror could want to have a number of market makers create synthetic quantity to satisfy minimal necessities for having their crypto belongings on their buying and selling platforms A market maker could accomplish this through the use of a number of accounts it instantly or not directly controls to commerce towards its personal citation.
As famous within the SEC grievance towards ZM Quant Funding Ltd., “right here there isn’t a change in helpful possession of the asset traded, however the commerce creates the looks of a market-driven transaction.” The apply of “wash buying and selling” may give the cryptoasset higher prominence and doubtlessly appeal to extra pure patrons and sellers, which might are likely to push up the value of the underlying token.
The danger of pricing manipulation is particularly excessive at or across the time of a token Preliminary Coin Providing. The founders and preliminary traders in a token platform could maintain a big portion of the belongings at inception and will have a powerful incentive in producing public curiosity within the tokens to allow them to discharge their place at favorable costs. From a good worth perspective, you will need to keep vigilant in regards to the high quality of the knowledge offered by digital token exchanges and whether or not such info is certainly coming from an “orderly market” led by “market individuals” in arms’ size transactions, particularly round ICO occasions.
Step 4: Determine Relevant Reductions
An investor in digital tokens could maintain a place that’s massive in relation to the amount traded on the principal alternate and be involved in regards to the affect that promoting such a big “block” of tokens could have on token costs. Ought to a reduction to the market value be utilized? Beneath the honest worth normal of ASC 820 and IFRS 13, blockage reductions will not be permitted. There’s, nonetheless, the potential of making use of a reduction for lack of marketability when the tokens themselves carry restriction options that will switch from the vendor to the customer upon the token sale.
Step 5: Quantify a Low cost for Lack of Marketability
It’s common for digital tokens that had been acquired instantly from the issuing platform to hold lock-up provisions that limit token gross sales over sure durations of time (“Vested Tokens”). In such circumstances, the honest worth of the token would usually embrace a reduction for lack of marketability (DLOM). Desk 1 gives an instance of a vesting schedule, during which the underlying tokens are unlocked over a 12- month interval.
Desk 1: Instance of Digital Token Vesting Schedule.
In Desk 2, the DLOM for the vesting schedule above is estimated utilizing the Ghaidarov Common Strike Protecting Put Possibility Mannequin.
Desk 2: Ghaidarov Common Strike Put Possibility Mannequin.
Given a volatility of 140% and a mean time to maturity of 0.5 years, the vesting schedule in Desk 2 ends in a DLOM of 23.4% over the market value of the token on the valuation date. Slightly than calculating a mean time period and utilizing the common time period within the put possibility pricing mannequin, analysts may additionally estimate a separate DLOM for every tranche in greenback worth, and sum up the outcomes.
The ends in Desk 3 are closely reliant on the volatility enter. The estimate of volatility is without doubt one of the most difficult elements of the valuation of digital tokens with vesting provisions. To the extent the topic token is thinly traded or could have traded in a market that isn’t orderly, it may be acceptable to think about the volatility of a number of guideline comparable tokens or a reference index with acceptable layer and normal traits.
For tokens which might be near their Preliminary Coin Providing, the time period used to calculate the volatility of the chosen comparables could must be adjusted to think about the interval from a date that’s equidistant from the date of their respective ICO because the reference date of the topic token, relatively than utilizing the identical calendar time period.
Desk 3 exhibits the volatility of a number of Layer 1 tokens from their ICO date to a reference date that’s 127 days from the ICO date (the “Reference Volatility”) and the associated one-month to three-year ahead volatility. The volatility declines considerably for all tokens as we transfer previous the six-month ahead interval.
Accordingly, it might usually not be acceptable to match, say, the 127-day historic volatility for a token ranging from its ICO date with the volatility over the latest 127 days for a longtime token like Bitcoin or Ethereum. A comparative evaluation that considers the 127 days volatility of Bitcoin or Ethereum ranging from their very own respective ICO date could also be extra significant underneath such circumstances.
Desk 3: Historic Volatility Comparability.
It is very important select an appropriate put possibility pricing mannequin in a digital token DLOM evaluation. The Black-Scholes framework has sure conceptual limitations within the estimate of a DLOM for tokens which have volatility within the excessive double digits or typically even within the triple digits. At excessive volatility ranges (e.g., >150%), the Black-Scholes mannequin tends to supply skewed and unstable outputs, which are likely to diverge from observable market habits.
The Ghaidarov mannequin that we’ve utilized in Exhibit 3 extends the option-pricing framework by introducing forward-starting and sequential-input choices, permitting for partial train all through the illiquidity interval, and dynamic strike-price changes that replicate evolving liquidity. It additionally constrains low cost progress at excessive volatility, stopping unrealistic outcomes.
Whereas it has its personal limitation, the Ghaidarov mannequin has the benefit of being particularly designed for multi-period illiquidity situations, corresponding to staggered vesting, and will present a extra sturdy various to the Black-Scholes mannequin in high-volatility, non-hedgeable environments.
Valuing SAFTs (Easy Agreements for Future Tokens)
Easy Agreements for Future Tokens (SAFTs) are funding agreements supplied by crypto builders whereby traders present capital to the builders in alternate for digital tokens at a future date. Like Easy Agreements for Future Fairness (SAFEs) within the enterprise capital world, SAFTs usually have a reduction provision and will have a valuation cap. SAFTs could differ by way of what occurs if the set off occasion doesn’t happen. Attainable situations embrace: 1) give capital again to traders forward of different stakeholders within the enterprise and a couple of) render the SAFT nugatory.
A state of affairs evaluation is usually an appropriate technique to method the valuation of SAFTs. As soon as the situations for efficiency are outlined on the inception of the deal (the “Calibration Date”), the worth is adjusted at subsequent dates primarily based on the evaluation of deal efficiency relative to preliminary expectations.
Conclusion: Making use of Honest Worth in a Fragmented Market
In right now’s market, the worth of digital belongings should be captured in funding and enterprise valuation. Analysts should broaden the vary of information sources and strategies they use in valuation and develop methodologies which might be appropriate to the digital asset being valued for extra dependable valuation outcomes. Analysts ought to keep skilled skepticism and stay alert to potential market manipulation for tokens in frivolously regulated, personal token markets. The outcomes of our valuation evaluation are closely reliant on the standard of knowledge that we think about and on our understanding of the technical options of the tokens and the markets during which they commerce.
References
[1] U.S. Securities and Trade Fee v. ZM Quant Funding Ltd, Baijun Ou, a.ok.a. Eric Ou, and Ruiqi Lau, a.ok.a. Ricky Liu, filed October 9, 2024 in U.S. District Courtroom, District of Massachusetts.
