Cryptoasset Valuations

Early Days of Cryptoasset Valuation

  • The TAM for remittances in 2014 was $436 billion (using a present TAM for future adoption was a mistake).
  • Potential percent penetration of that market could be 10%, meaning Bitcoin’s blockchain would have to transact 10% x $436 billion, or $43.6 billion, to satisfy this demand (not providing a time frame for adoption makes it impossible to deduce percent return each year).
  • The “same bitcoin” could be used multiple times in the transmission of value for remittances — in this case 1.5 times per year. Hence, $43.6B / 1.5 = $30 billion in value that bitcoin would need to store (more on velocity later; 1.5 was too low).
  • At the time of publication, there were 14.7 million coins outstanding, so $30B / 14.7M = $2,000 per bitcoin (using the present number of coins for future adoption was another mental error).

Theory Behind Cryptoasset Valuations

  • M = size of the asset base
  • V = velocity of the asset
  • P = price of the digital resource being provisioned
  • Q = quantity of the digital resource being provisioned

Valuing a Bandwidth Token: INET

  • When the cryptonetwork will launch and adoption will start (Base Year)
  • Maximum share the network will take of its target market (Saturation Percentage)
  • When the network will hit 10% of its Saturation Percentage (Start of Fast Growth — this can be thought of as the inflection point)
  • Amount of time it takes for the network to go from 10% to 90% of its Saturation Percentage (Take Over Time).

Still Early Days

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partner @placeholdervc, twitter @cburniske, formerly led @ARKInvest’s crypto efforts. Co-author of “Cryptoassets” 👉 bitcoinandbeyond.com

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Chris Burniske

Chris Burniske

partner @placeholdervc, twitter @cburniske, formerly led @ARKInvest’s crypto efforts. Co-author of “Cryptoassets” 👉 bitcoinandbeyond.com

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