The event of digital monetary belongings has essentially modified the monetary ecosystem, difficult conventional valuation methodologies and introducing new complexities for each analysts and buyers. Digital belongings — which embody 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 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 should be tailored to a market the place observable inputs, governance buildings, and buying and selling conventions differ sharply from established asset lessons. This publish explains easy methods to method truthful worth measurement for digital tokens underneath ASC 820 and IFRS 13, highlighting key areas {of professional} judgment reminiscent of 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 truthful worth underneath various market and liquidity circumstances.
In contrast to conventional monetary belongings, many digital devices usually lack established market oversight, observable market inputs, or frequent and constant rights of possession. Tokenized securities might symbolize useful pursuits in particular function automobiles, 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 threat, and will be inclined to manipulation. These components complicate the applying of established valuation strategies reminiscent of 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 belongings.
Even with these important challenges, the normal valuation approaches nonetheless apply to the valuation of digital belongings. Tokens that generate money flows to their holder might lend themselves to using a reduced money circulation methodology of valuation. Sure digital belongings are actively traded on sure exchanges, which can be helpful to offer 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 publish explores the valuation challenges posed by digital belongings, with a deal with truthful worth measurement, marketability reductions, authorized construction, and technological threat. It proposes a structured method to valuation that integrates conventional monetary ideas with rising practices in blockchain analytics and decentralized finance.
By way of sensible examples and a methodological evaluation of tokens which are traded on main digital exchanges reminiscent of 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 sometimes qualify as Degree 1 or Degree 2 belongings underneath the ASC 820/IFRS 13 truthful 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 frequent 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 essential to establish the important thing technical options of the digital asset being valued. Some frequent sorts embody:
- Cryptocurrencies (ex: Bitcoin, Ethereum, Solana). Cryptocurrencies sometimes 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 sometimes 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 might break in durations of market disruption and should 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 features. 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 worth of a utility token will sometimes profit from progress made within the improvement 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 essential to evaluate the token’s threat 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 completely different layers.
Native Layer-1 tokens are the first cryptocurrencies of unbiased blockchain networks, reminiscent of 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 additionally differ primarily based on their use of requirements. For example, Binance USD (BUSD) operates utilizing the ERC-20 customary on Ethereum, whereas NTFs sometimes use ERC-721.
Different essential options to think about embody 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 undertaking behind the token’s issuance and can assist establish its key technical options.
Step 2: Decide the Principal Market
In line with ASC 820 and IFRS 13, the truthful worth of an asset needs to be measured primarily based on pricing data obtained from its “principal market,” outlined as “the market with the best quantity and degree 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 embody Binance, Bybit, Coinbase Change, Upbit, OKX, Bitget, Gate, MexC and KuCoin. The reported costs fluctuate in line with the trade, in some instances 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 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: Prime 10 Exchanges for Buying and selling Ethereum.
Supply: Coinmarketcap, October 29, 2025 10:11 a.m. EST.
Step 3: Determine the Exit Worth
Beneath ASC 820 and IFRS 13, truthful worth is supposed to mirror an “exit worth,” specifically the value that might be obtained to promote an asset in an orderly transaction between market members on the measurement date. Cryptocurrencies commerce repeatedly and sometimes exhibit excessive intra-day volatility. Which cut-off date ought to we use to establish our exit worth for the token on the valuation date?
In answering this query, analysts might need to check with any steering offered in contractual agreements. For example, they could flip to the valuation coverage for an funding firm, a restricted partnership settlement, or a fund non-public 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 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 might think about using the typical day by day worth (easy or volume-weighted) from a specified supply, the “shut worth” per Coinmarketcap or one other knowledge supplier, the value from a specific trade, or the typical 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 understand that the decentralized nature of the marketplace for digital tokens makes them particularly vulnerable to the danger of pricing manipulation. In October 2024, the US Securities and Change Fee introduced fraud costs towards ZM Quant Funding Ltd. and sure different “market makers” for participating in schemes to govern the markets for numerous crypto belongings being provided and bought as securities to retail buyers. The schemes had been allegedly meant to induce investor victims to buy the crypto belongings by creating the false look of an energetic 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 payment. A token offeror might want to have a number of market makers create synthetic quantity to fulfill minimal necessities for having their crypto belongings on their buying and selling platforms A market maker might accomplish this through the use of a number of accounts it straight or not directly controls to commerce towards its personal citation.
As famous within the SEC criticism towards ZM Quant Funding Ltd., “right here there is no such thing as 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” might give the cryptoasset better prominence and doubtlessly entice extra pure patrons and sellers, which might are inclined to push up the value 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 belongings at inception and should 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, you will need to keep vigilant concerning the high quality of the data offered by digital token exchanges and whether or not such data is certainly coming from an “orderly market” led by “market members” in arms’ size transactions, particularly round ICO occasions.
Step 4: Determine Relevant Reductions
An investor in digital tokens might maintain a place that’s giant in relation to the amount traded on the principal trade and be involved concerning the influence that promoting such a big “block” of tokens might have on token costs. Ought to a reduction to the market worth be utilized? Beneath the truthful worth customary of ASC 820 and IFRS 13, blockage reductions are usually not permitted. There may be, nonetheless, the potential of making use of a reduction for lack of marketability when the tokens themselves carry restriction options that might switch from the vendor to the client upon the token sale.
Step 5: Quantify a Low cost for Lack of Marketability
It is not uncommon for digital tokens that had been acquired straight from the issuing platform to hold lock-up provisions that prohibit token gross sales over sure durations of time (“Vested Tokens”). In such instances, the truthful worth of the token would sometimes embody a reduction for lack of marketability (DLOM). Desk 1 offers an instance of a vesting schedule, by 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. Slightly than calculating a mean time period and utilizing the typical time period within the put choice pricing mannequin, analysts might 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 facets 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’s not orderly, it is perhaps acceptable to think about the volatility of a choice of guideline comparable tokens or a reference index with acceptable layer and customary traits.
For tokens which are 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, somewhat than utilizing the identical calendar time period.
Desk 3 exhibits the volatility of a choice 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 sometimes not be acceptable to check, say, the 127-day historic volatility for a token ranging from its ICO date with the volatility over the newest 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 acceptable 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 generally 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 inclined to diverge from observable market habits.
The Ghaidarov mannequin that we have now 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 mirror 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 eventualities, reminiscent of staggered vesting, and should present a extra strong different 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 sometimes have a reduction provision and should have a valuation cap. SAFTs might fluctuate by way of what occurs if the set off occasion doesn’t happen. Attainable eventualities embody: 1) give capital again to buyers forward of different stakeholders within the enterprise and a pair of) render the SAFT nugatory.
A state of affairs evaluation is usually an acceptable 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 present’s market, the worth of digital belongings should be captured in funding and enterprise valuation. Analysts should increase the vary of information sources and strategies they use in valuation and develop methodologies which are 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 flippantly regulated, non-public token markets. The outcomes of our valuation evaluation are closely reliant on the standard of knowledge that we take into account and on our understanding of the technical options of the tokens and the markets by which they commerce.
References
[1] U.S. Securities and Change 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.
