The guide for investors on crypto reviews in 2022
The guide for investors on crypto reviews in 2022
- The crypto rating is the process of determining whether the at the time value of a crypto asset is overvalued by the market
- Traditional evaluation methods may be difficult to implement in view of the nuances in the developing space in crypto
One of the first lessons in finance is that the value of a financial value is not always identical to the price of an assets. The inner value is something that financial analysts can quantify by evaluating dividends, cash flows and growth rates. Since crypto-assets are missing these traditional and quantifiable metrics, the old evaluation framework has developed in order to better understand this new asset class.
In this sense,crypto rating is the process of determination as to whether the usable current value of a crypto asset is overvalued or undervalued by the market. These models require a high degree of nuanced understanding, since digital assets exist along a spectrum of functions - with some considered goods and others as securities. Analysts must correctly identify and apply another series of tokenomic and regulatory standards when evaluating assets in this spectrum.
to learn more about it, we spoke to some experts from Teknos Associates.
Neil Thakur is the managing director at Teknos-Partner (teknos). In Neil's words, Teknos is "a valuation consulting company that works with aspiring growth technology companies, whereby our group focuses specifically on the crypto and blockchain industry". These services relate to the output and transfer of tokens or related assets for investment, tax or financial reporting purposes.
approaches to the crypto rating
Analysts traditionally use company data and often use market data to derive stock reviews. An income -based model such as the discounted cash flow or a market -based model such as an analysis of comparable companies are mathematical methods that are used to provide sound estimates of the appropriate market value of a company's shares.
In view of the nuances of the crypto industry, some of these traditional evaluation methods can be difficult to implement. These examples include stock-to-flow, token velocity (based on the quantity theory of money), every day active addresses/users and the ratio of network value to transaction.Without getting too details, it is important to note that each of them has their different advantages and disadvantages. In addition, when checking these models, it really depends on the ability to measure and test the entries and assumptions. Since we are still in the beginning of the cryptom market, it is still very difficult to undergo many of the theoretical constructs to a baking test.
In addition to basic evaluation considerations, several regulatory factors must also be taken into account, since there are still considerable uncertainty as to whether some crypto assets would be considered securities as part of the Howey test. could many protocols, such as z. B. Proof-of-Stake-token, under the law enforcement of security authorities.
In terms of Teknos, Neil found that the methods taken into account in their analyzes can vary depending on the special features of the respective engagement. According to Neil, factors such as the level of development of a protocol, lock-ups, staking, market dynamics and functional features all a role in the value and the risks associated with tokens. The understanding of these factors enables us to assess whether an asset, market or yield evaluation approach is applicable. "Neil added: "The purpose of commitment can also influence methodological decisions. For example, with some tax and financial reporting analysis, we may not always be able to take into account the effects of token barriers, unless you are structured in a very specific way. Alternatively, we can spend more time with investment-related engagements, market dynamics and future analyzes in combination To look at scenario models. In view of the fact that the industry is still at a very early stage, it is important to remain open and to develop our evaluation methods, as the industry and the regulatory environment in which it is active. "
Recent risk capital financing in crypto
Despite the declining market mood for the sector and the macroumpfield as a whole, risk capital financing continues to grow. In contrast to crypto-assets, this type of financing mainly relies on traditional evaluation models. These investors look at crypto companies and relevant market indicators to try to measure the inner value. This does not mean that crypto-asset reviews are not used in this process. They still apply when analysts find that the value of crypto company largely depends on a single crypto-asset or even on the cryptom market. Here are a few quick highlights from the year:
- Mysten Labs, the developer of the Sui-Layer 1-Blockchain, brought up in a financing round of the series B, which The company evaluates with over $ 2 billion-a sign that investors see Layer 1 blockchains as large disruptors.
- decentralized exchange uniswap labs 165 million US dollar in a serieb-financing round, the inventory Polychain Capital was listed.
- Flowcarbon by Wework founder Adam Neumann, a blockchain-capable trading platform for emission certificates, collected $ 70 million in his first major financing round.
- The FTX crypto exchange recently collected $ 400 million in a series-C round and could apply another $ 1 billion. If the average procurement of one billion dollars goes through, the stock exchange would keep an assessment of $ 32 billion.
- total, Crypto sector rose year after year from $ 6.08 billion in the second quarter of 2021 to $ 8.3 billion in the second quarter of 2022.
While some venture companies are eagerly capitalized, others stay on the sidelines and wait for the conditions to be ripe.
Who buys and who is waiting
In a way, everyone wants to start in crypto, but at the same time nobody wants to get in in crypto. Large capital amounts will continue to be invested in the room, but due to various macroeconomic considerations and the regulatory concerns mentioned above, large sums of money remain that carefully wait for the correct starting time.
Much of this mixed mood has to do with the current macroeconomic uncertainty within the global economic and financial system. Neil described it as follows: "You all spend money, but it is a little more careful, right? We don't see an environment as foamy for obvious reasons. You have macroeconomic problems in the game and honestly, there is still a whole degree of regulatory uncertainty."
he continued that there was a certain "waiting approach", but at some point "there is a big pressure on General Partners to use the money collected in recent years."
In terms of whether potential investors are waiting for clearer regulations before they are committed, Neil said: "I don't think they will be waiting for it" after not seeing that we will probably not see complete regulatory clarity in the near future.
What should be considered in crypto ratings
It can be difficult to identify the elements from which investors can benefit the most when determining the value of a crypto asset. Depending on which model is used, certain factors can play a larger role than others.
one thing is certain: macro is important
Alex Salvadori from daemon venture , a crypto-boutique-angel fund said to one of the most important factors that should be observed when implementing crypto ratings: "In the past If investors assumed that BTC, ETH and other old coins operate independently. also take into account some of the macrofactors that can drive things forward at the same time. ”
Alex also noticed an increased focus on macro content through various crypto outlet, including the recently launched macrofocussed YouTube channel from block works, which highlights the growing meaning of this topic in crypto technology.
Once was crypto an isolated investment class, which was largely uncorrelated with traditional markets. But now, in a market with growing dependence on central bank loans, speculative assets such as crypto and technology shares are moving in parallel. If the world is in a so-called “all-bladder”, analysts need a better assessment of “everything” before specifying one for a specific asset or a certain security. Since the teams of Daemon Ventures and Teknos this requires a serious consideration of the macroeconomic forces in the game.
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The contribution The Investor’s Guide to Crypto Valuation in 2022 is not a financial advice.
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