Token Valuations
Sources:
The valuation of crypto tokens involves several approaches and considerations, reflecting their complexity as a new asset class. Here are some insights from various experts:
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Network Effects and High Return Potential:
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VC Style Models and Token Economics:
- Linda Xie discusses valuing tokens from a fundamental perspective, considering tech, teams, community, and token economics. She references models like the velocity model (MV=PQ), which examines the utility and necessity of holding a token over time 2.
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Fragmented Information and Research:
- Ben Forman highlights the challenge of non-standardized, fragmented information in the crypto market. He compares the evaluation process to traditional equity research, focusing on use cases, competitive moats, and smart contract integrity. Tokens are often seen as claims on cash flows, akin to equities 3 .
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Market Hype and Liquidity Issues:
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Token Lockups and Unlocks:
- Token prices can surge or drop based on token unlock schedules, indicating their sensitivity to supply changes and investor psychology 6.
Overall, valuing tokens is complex and relies on both traditional financial models and unique crypto-specific factors. The early-stage nature of many projects necessitates a high-risk, high-reward perspective, similar to venture capital investing.
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