The event of digital monetary property has basically modified the monetary ecosystem, difficult conventional valuation methodologies and introducing new complexities for each analysts and buyers. Digital property — 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 because of the absence of standardized valuation frameworks and strategies, a market infrastructure that’s usually fragmented, and restricted technological transparency.
For monetary analysts, this evolution presents each a possibility and a problem. Conventional valuation ideas nonetheless apply, however they have to be tailored to a market the place observable inputs, governance constructions, and buying and selling conventions differ sharply from established asset courses. This put up explains find out how to method honest worth measurement for digital tokens beneath ASC 820 and IFRS 13, highlighting key areas {of professional} judgment akin 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 beneath various market and liquidity circumstances.
In contrast to conventional monetary property, many digital devices usually lack established market oversight, observable market inputs, or frequent and constant rights of possession. Tokenized securities might characterize useful pursuits in particular goal autos, fractional fairness, or artificial exposures, every with distinct authorized and financial implications.
Cryptocurrencies and NFTs, in contrast, are traded throughout decentralized exchanges with various levels of worth transparency and custody danger, and might be inclined to manipulation. These elements complicate the appliance of established valuation strategies akin to these described in ASC 820 and IFRS 13 Truthful Worth Measurements, which depend on market participant assumptions and observable inputs. These standards could also be absent or unreliable with digital property.
Even with these important challenges, the normal valuation approaches nonetheless apply to the valuation of digital property. Tokens that generate money flows to their holder might lend themselves to using a reduced money stream technique of valuation. Sure digital property 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 might be helpful in making use of strategies of valuation beneath the price method.
This put up explores the valuation challenges posed by digital property, with a give attention to honest worth measurement, marketability reductions, authorized construction, and technological danger. It proposes a structured method to valuation that integrates conventional monetary rules with rising practices in blockchain analytics and decentralized finance.
By way of sensible examples and a methodological evaluation of tokens which can be traded on main digital exchanges akin 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 available on the market method.
Relying on buying and selling quantity and market traits, these tokens would usually qualify as Degree 1 or Degree 2 property beneath 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 turning into more and more frequent in token-based fund elevating as a substitute for precise token issuance for early-stage initiatives.
Step 1: Establish the Token You’re Valuing
As a primary step within the valuation course of, it’s crucial to establish the important thing technical options of the digital asset being valued. Some frequent varieties 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 foreign money such because the US greenback or the Euro. They usually commerce at a worth near par (1 USDT = 1 USD), however, equally to sure cash market funds, this parity shouldn’t be taken without any consideration, as it may 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 providers supplied 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 features. They is also bought as an funding to achieve publicity to the underlying platform. Whereas a token doesn’t present fairness participation rights, the traded worth 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 crucial to evaluate the token’s danger profile, establish comparable tokens, and establish the drivers of provide and demand which finally decide the token’s market efficiency. Tokens that function on the identical blockchain might belong to totally different layers.
Native Layer-1 tokens are the first cryptocurrencies of unbiased blockchain networks, akin to Bitcoin (BTC) and Ethereum (ETH). Layer 2 tokens try to increase the capabilities of the underlying base layer community. Tokens on the identical blockchain can also differ primarily based on their use of requirements. As an illustration, Binance USD (BUSD) operates utilizing the ERC-20 customary on Ethereum, whereas NTFs usually use ERC-721.
Different necessary 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 data on the mission behind the token’s issuance and can assist establish its key technical options.
Step 2: Decide the Principal Market
In accordance with ASC 820 and IFRS 13, the honest worth of an asset ought to be measured primarily based on pricing data obtained from its “principal market,” outlined as “the market with the best quantity and stage of exercise for an asset or legal responsibility.” It is not uncommon for digital tokens to commerce on a number of exchanges.
For instance, primarily based on data 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 range in line with the trade, 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, it is very important establish the reference trade, and/or whether or not a composite worth such because the “Shut” worth reported by Coinmarketcap is used as an alternative.
Exhibit 1: High 10 Exchanges for Buying and selling Ethereum.
Supply: Coinmarketcap, October 29, 2025 10:11 a.m. EST.
Step 3: Establish the Exit Worth
Underneath ASC 820 and IFRS 13, honest worth is supposed to replicate an “exit worth,” particularly the worth that will be acquired to promote an asset in an orderly transaction between market contributors on the measurement date. Cryptocurrencies commerce constantly and usually exhibit excessive intra-day volatility. Which time limit ought to we use to establish our exit worth for the token on the valuation date?
In answering this query, analysts might wish to discuss with any steering supplied in contractual agreements. As an illustration, 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 steering, analysts might choose a valuation time, usually aligned with the token holder’s location. After selecting that time limit (e.g., 12 a.m. EST, 5 p.m. EST, 12 a.m. PST), analysts ought to use it constantly.
Alternatively, analysts might think about using the common every day worth (easy or volume-weighted) from a specified supply, the “shut worth” per Coinmarketcap or one other knowledge supplier, the worth from a specific trade, or the common of every 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, it is very important take into account that the decentralized nature of the marketplace for digital tokens makes them particularly susceptible to the chance of pricing manipulation. In October 2024, the US Securities and Trade Fee introduced fraud costs in opposition to ZM Quant Funding Ltd. and sure different “market makers” for participating in schemes to govern the markets for numerous crypto property being provided and bought as securities to retail buyers. The schemes have been allegedly supposed to induce investor victims to buy the crypto property by creating the false look of an lively buying and selling marketplace for them.[1]
Within the cryptoasset markets, it’s usually the developer of a digital token platform (the “offeror”) who pays the market maker a month-to-month charge. A token offeror might want to have a number of market makers create synthetic quantity to satisfy minimal necessities for having their crypto property on their buying and selling platforms A market maker might accomplish this through the use of a number of accounts it instantly or not directly controls to commerce in opposition to its personal citation.
As famous within the SEC grievance in opposition to ZM Quant Funding Ltd., “right here there isn’t a change in useful possession of the asset traded, however the commerce creates the looks of a market-driven transaction.” The observe of “wash buying and selling” may give the cryptoasset larger prominence and probably entice extra pure consumers and sellers, which might are likely to push up the worth of the underlying token.
The chance of pricing manipulation is particularly excessive at or across the time of a token Preliminary Coin Providing. The founders and preliminary buyers in a token platform might maintain a big portion of the property at inception and will have a robust incentive in producing public curiosity within the tokens to allow them to discharge their place at favorable costs. From a good worth perspective, it is very important keep vigilant in regards to the high quality of the knowledge supplied by digital token exchanges and whether or not such data is certainly coming from an “orderly market” led by “market contributors” in arms’ size transactions, particularly round ICO occasions.
Step 4: Establish Relevant Reductions
An investor in digital tokens might maintain a place that’s massive in relation to the amount traded on the principal trade and be involved in regards to the impression that promoting such a big “block” of tokens might have on token costs. Ought to a reduction to the market worth be utilized? Underneath the honest worth customary of ASC 820 and IFRS 13, blockage reductions are usually not permitted. There’s, nevertheless, 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 is not uncommon for digital tokens that have been acquired instantly from the issuing platform to hold lock-up provisions that prohibit 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 supplies an instance of a vesting schedule, through 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 leads to a DLOM of 23.4% over the market worth of the token on the valuation date. Somewhat than calculating a mean time period and utilizing the common time period within the put choice pricing mannequin, analysts may additionally estimate a separate DLOM for every tranche in greenback worth, and sum up the outcomes.
The leads to Desk 3 are closely reliant on the volatility enter. The estimate of volatility is likely 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 might have traded in a market that isn’t orderly, it could be acceptable to think about the volatility of a collection of guideline comparable tokens or a reference index with acceptable layer and customary traits.
For tokens which can be near their Preliminary Coin Providing, the time period used to calculate the volatility of the chosen comparables might 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, fairly than utilizing the identical calendar time period.
Desk 3 exhibits the volatility of a collection 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 will usually not be acceptable to check, 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 beneath such circumstances.
Desk 3: Historic Volatility Comparability.
It is very important select an appropriate put choice 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 provide skewed and unstable outputs, which are likely to diverge from observable market conduct.
The Ghaidarov mannequin that we’ve got 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, akin to staggered vesting, and will present a extra strong 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 provided by crypto builders whereby buyers present capital to the builders in trade 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 might range by way of what occurs if the set off occasion doesn’t happen. Potential situations embrace: 1) give capital again to buyers forward of different stakeholders within the enterprise and a couple of) render the SAFT nugatory.
A state of affairs evaluation is usually an appropriate approach to method the valuation of SAFTs. As soon as the circumstances 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 Truthful Worth in a Fragmented Market
In at this time’s market, the worth of digital property have to be captured in funding and enterprise valuation. Analysts should develop the vary of knowledge sources and methods they use in valuation and develop methodologies which can be appropriate to the digital asset being valued for extra dependable valuation outcomes. Analysts ought to preserve skilled skepticism and stay alert to potential market manipulation for tokens in calmly regulated, personal token markets. The outcomes of our valuation evaluation are closely reliant on the standard of data that we think about and on our understanding of the technical options of the tokens and the markets through which they commerce.
References
[1] U.S. Securities and Trade Fee v. ZM Quant Funding Ltd, Baijun Ou, a.okay.a. Eric Ou, and Ruiqi Lau, a.okay.a. Ricky Liu, filed October 9, 2024 in U.S. District Court docket, District of Massachusetts.
