Title: How to obtain the fair value for cryptocurrency and digital assets

Authors: Nipun Agarwal

Addresses: KPMG, Tower 3, Barangaroo, Sydney, 2000, Australia

Abstract: Digital asset prices have been highly volatile, and it is hard to understand their fair value as you would with traditional assets. There has been some research to consider how cryptocurrencies and digital assets can be valued. However, there are no mainstream valuation theories that have still been developed. This paper undertakes a survey of some of the methods utilised to perform this valuation in practice at present. Though, as cryptocurrencies have a significant technology component, as a result, the existing valuation models being used in the industry are different to the traditional valuation models. This paper intends to review traditional asset valuation models like the CAPM and APT. When reviewing industry-based models that are used to value digital assets, we notice that neither of these models provides a simplistic way of analysing the fair value of digital assets. Therefore, this paper develops the volatility-based digital asset model to show how traditional and digital assets can be valued using a standard model.

Keywords: cryptocurrency; digital assets; bitcoin; valuation; fair value; volatility; valuation models; blockchain; capital asset pricing model; CAPM; arbitrage pricing theory; APT.

DOI: 10.1504/IJBC.2022.122990

International Journal of Blockchains and Cryptocurrencies, 2022 Vol.3 No.1, pp.16 - 23

Received: 12 Aug 2021
Accepted: 04 Nov 2021
Published online: 19 May 2022 *