With the rise in American investors holding crypto assets in recent years, it can be challenging for investment professionals to value them accurately.
To help advisors navigate the evolving landscape, the CFA Institute has created a guide to the most relevant valuation models and tools to support analysis of crypto assets, in connection with smart contract platforms, decentralized applications, and bitcoin.
Over the past decade, the market cap of crypto assets has soared to an estimated $1 trillion, according to CoinGecko, while the price volatility and industry upheaval that has become synonymous with crypto adds to the valuation conundrum.
As part of a move towards the development of a framework for crypto assets valuation, the models in the CFA Institute guide include fundamental valuation approaches such as discounted cash flow analysis and relative valuation approaches adapted from traditional finance, where appropriate, as well as newer models specific to crypto assets.
"This guide provides a framework for investment professionals to undertake a thorough analysis of the valuation drivers of crypto assets, including fundamental characteristics such as cash flows, growth rates, and tokenomics,” Rhodri Preece, senior head of research at the CFA Institute, said in a statement. “Current valuation models have their limitations, and the lack of historical data make statistically robust crypto asset valuations challenging. No single valuation model or metric should be used in isolation."
There is complexity around establishing valuation models for crypto assets, with for example, four valuation models for bitcoin alone: total addressable market, stock-to-flow, Metcalfe's law, and the cost of production model.
Preece notes that history shows that the establishment of valuation standards can take a long time.
"After Graham and Dodd published the classic 'Security Analysis' in 1934, it took decades for an established investment valuation framework to emerge for equities,” he said. “Most crypto assets are less than a decade old; as such, we should not be surprised that views over their valuation and legitimacy in investment portfolios vary widely.”
The CFA Institute’s Valuation of Cryptoassets: A Guide for Investment Professionals is available here.
Eliseo Prisno, a former Merrill advisor, allegedly collected unapproved fees from Filipino clients by secretly accessing their accounts at two separate brokerages.
The Harford, Connecticut-based RIA is expanding into a new market in the mid-Atlantic region while crossing another billion-dollar milestone.
The Wall Street giant's global wealth head says affluent clients are shifting away from America amid growing fallout from President Donald Trump's hardline politics.
Chief economists, advisors, and chief investment officers share their reactions to the June US employment report.
"This shouldn’t be hard to ban, but neither party will do it. So offensive to the people they serve," RIA titan Peter Mallouk said in a post that referenced Nancy Pelosi's reported stock gains.
Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.
Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.
