The event of digital monetary property has essentially modified the monetary ecosystem, difficult conventional valuation methodologies and introducing new complexities for each analysts and buyers. Digital property — which embody cryptocurrencies, stablecoins, non-fungible tokens (NFTs), and tokenized securities — are actually 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 typically fragmented, and restricted technological transparency.
For monetary analysts, this evolution presents each a chance and a problem. Conventional valuation ideas nonetheless apply, however they should 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 how one can strategy truthful worth measurement for digital tokens underneath 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 truthful worth underneath various market and liquidity situations.
Not like conventional monetary property, many digital devices typically lack established market oversight, observable market inputs, or widespread and constant rights of possession. Tokenized securities could symbolize helpful pursuits in particular objective 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 might be inclined to manipulation. These components complicate the applying 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 normal valuation approaches nonetheless apply to the valuation of digital property. Tokens that generate money flows to their holder could lend themselves to the usage of a reduced money stream 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 might be helpful in making use of strategies of valuation underneath the fee strategy.
This submit explores the valuation challenges posed by digital property, with a concentrate on truthful worth measurement, marketability reductions, authorized construction, and technological threat. It proposes a structured strategy to valuation that integrates conventional monetary ideas with rising practices in blockchain analytics and decentralized finance.
By 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 strategy.
Relying on buying and selling quantity and market traits, these tokens would sometimes qualify as Stage 1 or Stage 2 property underneath the ASC 820/IFRS 13 truthful worth requirements. We conclude with some notes on Easy Settlement for Future Tokens (SAFTs) as a kind of contract (Stage 3) that’s changing into more and more widespread in token-based fund elevating as an alternative choice to precise token issuance for early-stage tasks.
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 widespread 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 foreign money 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 could actually break in intervals 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 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 capabilities. They may be 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 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 vital 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 could belong to completely different layers.
Native Layer-1 tokens are the first cryptocurrencies of unbiased 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 might also differ primarily based on their use of requirements. As an illustration, Binance USD (BUSD) operates utilizing the ERC-20 normal on Ethereum, whereas NTFs sometimes use ERC-721.
Different necessary options to contemplate embody the overall 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 info on the venture 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 truthful worth of an asset must be measured primarily based on pricing info obtained from its “principal market,” outlined as “the market with the best quantity and degree of exercise for an asset or legal responsibility.” It’s common for digital tokens to commerce on a number of exchanges.
For instance, primarily based on info from Coinmarketcap (Exhibit 1), the highest 10 exchanges for the buying and selling of Ethereum embody Binance, Bybit, Coinbase Trade, Upbit, OKX, Bitget, Gate, MexC and KuCoin. The reported costs range 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 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
Below ASC 820 and IFRS 13, truthful worth is supposed to replicate an “exit worth,” specifically 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 time limit ought to we use to establish our exit worth for the token on the valuation date?
In answering this query, analysts could need to consult with any steerage offered 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 steerage, analysts could choose a valuation time, typically 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 persistently.
Alternatively, analysts could think about using the common day by day worth (easy or volume-weighted) from a specified supply, the “shut worth” per Coinmarketcap or one other knowledge supplier, the worth from a selected trade, or the common 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 remember that the decentralized nature of the marketplace for digital tokens makes them particularly liable to the chance of pricing manipulation. In October 2024, the US Securities and Trade Fee introduced fraud costs towards ZM Quant Funding Ltd. and sure different “market makers” for partaking in schemes to control the markets for numerous crypto property being supplied and offered as securities to retail buyers. The schemes had been allegedly supposed to induce investor victims to buy the crypto property by creating the false look of an energetic buying and selling marketplace for them.[1]
Within the cryptoasset markets, it’s typically the developer of a digital token platform (the “offeror”) who pays the market maker a month-to-month charge. A token offeror could 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 could accomplish this by utilizing a number of accounts it straight or not directly controls to commerce towards its personal citation.
As famous within the SEC grievance towards ZM Quant Funding Ltd., “right here there isn’t a change in helpful possession of the asset traded, however the commerce creates the looks of a market-driven transaction.” The apply of “wash buying and selling” might give the cryptoasset larger prominence and doubtlessly appeal to extra pure consumers 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 buyers 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 in regards to the high quality of the knowledge offered by digital token exchanges and whether or not such info 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 massive in relation to the quantity traded on the principal trade and be involved in regards to the affect that promoting such a big “block” of tokens could have on token costs. Ought to a reduction to the market worth be utilized? Below the truthful worth normal of ASC 820 and IFRS 13, blockage reductions should 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 might switch from the vendor to the customer upon the token sale.
Step 5: Quantify a Low cost for Lack of Marketability
It’s common for digital tokens that had been acquired straight from the issuing platform to hold lock-up provisions that prohibit token gross sales over sure intervals 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 gives an instance of a vesting schedule, wherein 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 Choice Mannequin.
Desk 2: Ghaidarov Common Strike Put Choice Mannequin.
Given a volatility of 140% and a median 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. Moderately than calculating a median time period and utilizing the common time period within the put possibility 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 among the most difficult elements 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 perhaps acceptable to contemplate the volatility of a choice of guideline comparable tokens or a reference index with acceptable layer and normal 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, fairly than utilizing the identical calendar time period.
Desk 3 reveals 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 will 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 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 underneath such circumstances.
Desk 3: Historic Volatility Comparability.
You will need to 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 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 inclined to diverge from observable market habits.
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 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 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 supplied 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 could range by way of what occurs if the set off occasion doesn’t happen. Potential situations embody: 1) give capital again to buyers forward of different stakeholders within the enterprise and a pair of) render the SAFT nugatory.
A situation evaluation is commonly an acceptable technique to strategy 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 primarily based 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 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 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 wherein they commerce.
References
[1] U.S. Securities and Trade 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 Courtroom, District of Massachusetts.
