The event of digital monetary property has basically modified the monetary ecosystem, difficult conventional valuation methodologies and introducing new complexities for each analysts and traders. Digital property — 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 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 submit explains tips on how to method honest worth measurement for digital tokens below 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 below various market and liquidity situations.
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 could signify useful pursuits in particular goal automobiles, 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 danger, and will be prone 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 property.
Even with these vital challenges, the standard valuation approaches nonetheless apply to the valuation of digital property. Tokens that generate money flows to their holder could lend themselves to using a reduced money circulate methodology of valuation. Sure digital property are actively traded on sure exchanges, which can be helpful to offer inputs for relative valuation methodologies. Lastly, builders generally monitor the prices to tokenize a safety, which will be helpful in making use of strategies of valuation below the associated fee method.
This submit 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 means of 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 available on the market method.
Relying on buying and selling quantity and market traits, these tokens would sometimes qualify as Stage 1 or Stage 2 property below the ASC 820/IFRS 13 honest worth requirements. We conclude with some notes on Easy Settlement for Future Tokens (SAFTs) as a kind of contract (Stage 3) that’s turning 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 vital 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 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 might probably 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 major blockchain. They could 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 a wide range of different features. They is also 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 sometimes 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 vital 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 could belong to completely different layers.
Native Layer-1 tokens are the first cryptocurrencies of impartial 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 based mostly on their use of requirements. As an illustration, Binance USD (BUSD) operates utilizing the ERC-20 customary on Ethereum, whereas NTFs sometimes use ERC-721.
Different vital options to contemplate 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 response to ASC 820 and IFRS 13, the honest worth of an asset needs to be measured based mostly 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, based mostly on data from Coinmarketcap (Exhibit 1), the highest 10 exchanges for the buying and selling of Ethereum embody Binance, Bybit, Coinbase Alternate, Upbit, OKX, Bitget, Gate, MexC and KuCoin. The reported costs range based on the alternate, 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 alternate, and/or whether or not a composite value such because the “Shut” value reported by Coinmarketcap is used as a substitute.
Exhibit 1: High 10 Exchanges for Buying and selling Ethereum.
Supply: Coinmarketcap, October 29, 2025 10:11 a.m. EST.
Step 3: Determine the Exit Value
Underneath ASC 820 and IFRS 13, honest worth is supposed to mirror an “exit value,” particularly the worth that might be acquired to promote an asset in an orderly transaction between market members on the measurement date. Cryptocurrencies commerce constantly and sometimes exhibit excessive intra-day volatility. Which cut-off date ought to we use to establish our exit value for the token on the valuation date?
In answering this query, analysts could wish to consult with any steerage offered in contractual agreements. As an illustration, they could 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, 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 persistently.
Alternatively, analysts could think about using the typical each day value (easy or volume-weighted) from a specified supply, the “shut value” per Coinmarketcap or one other knowledge supplier, the worth from a specific alternate, or the typical of each 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 needless to say the decentralized nature of the marketplace for digital tokens makes them particularly susceptible to the danger of pricing manipulation. In October 2024, the US Securities and Alternate Fee introduced fraud prices towards ZM Quant Funding Ltd. and sure different “market makers” for participating in schemes to govern the markets for numerous crypto property being supplied and offered as securities to retail traders. 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 payment. A token offeror could want to have a number of market makers create synthetic quantity to fulfill minimal necessities for having their crypto property on their buying and selling platforms A market maker could accomplish this by utilizing a number of accounts it immediately or not directly controls to commerce towards its personal citation.
As famous within the SEC criticism towards ZM Quant Funding Ltd., “right here there isn’t any change in useful 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 inclined 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 traders in a token platform could maintain a big portion of the property at inception and should 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 concerning the high quality of the knowledge 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 could maintain a place that’s giant in relation to the amount traded on the principal alternate and be involved concerning the impression that promoting such a big “block” of tokens could have on token costs. Ought to a reduction to the market value be utilized? Underneath the honest worth customary of ASC 820 and IFRS 13, blockage reductions should not permitted. There’s, 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 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 immediately from the issuing platform to hold lock-up provisions that limit token gross sales over sure durations of time (“Vested Tokens”). In such instances, the honest worth of the token would sometimes embody a reduction for lack of marketability (DLOM). Desk 1 supplies 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 median 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. Moderately than calculating a median time period and utilizing the typical 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 features 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’s not orderly, it is likely to be acceptable to contemplate the volatility of a collection of guideline comparable tokens or a reference index with acceptable layer and customary 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 contemplate 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 reveals 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 might sometimes not be acceptable to match, 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 below such circumstances.
Desk 3: Historic Volatility Comparability.
It is very important select an acceptable 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 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 conduct.
The Ghaidarov mannequin that now we have 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 development 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 should present a extra sturdy 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 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 sometimes have a reduction provision and should have a valuation cap. SAFTs could range by way of what occurs if the set off occasion doesn’t happen. Potential situations embody: 1) give capital again to traders forward of different stakeholders within the enterprise and a pair of) render the SAFT nugatory.
A state of affairs evaluation is usually an acceptable strategy 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 based mostly on the evaluation of deal efficiency relative to preliminary expectations.
Conclusion: Making use of Honest Worth in a Fragmented Market
In as we speak’s market, the worth of digital property have to be captured in funding and enterprise valuation. Analysts should increase the vary of information sources and methods 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 data that we take into account and on our understanding of the technical options of the tokens and the markets during which they commerce.
References
[1] U.S. Securities and Alternate 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 Court docket, District of Massachusetts.
