The valuation of cryptoassets, such as Bitcoin and Ethereum, has emerged as a critical topic for the investment industry. While some investment professionals recognize cryptoassets as a legitimate asset class, many remain skeptical of its value proposition.

This guide reviews the tools available to value cryptoassets. Investors and investment professionals will benefit from the review, regardless of how one views the merits of cryptoassets in a portfolio context. This guide is not an exhaustive review of the valuation methods for cryptoassets. Instead, it details the relative and fundamental valuation approaches that are most relevant to practitioners. The analysis is informed by interviews with practitioners as well as synthesis of current literature.

This guide investigates the valuation models that apply to different elements of the cryptoasset universe, including smart contract platforms, decentralized applications, and Bitcoin (the longest-existing and largest cryptoasset).

CFA Institute Research and Policy Center does not endorse a particular view but seeks to inform the debate by setting out relevant valuation methodologies. This guide should not be interpreted as an endorsement, validation, or denial of cryptoassets. Our primary objective is to ensure that investment professionals and the wider industry are informed of current valuation methods and the discourse over their merits and demerits. The guide serves as part of a proactive undertaking toward a larger debate on the value proposition of cryptoassets.

We recognize that current valuation models and approaches carry several limitations and require further development. Therefore, a single model or metric should not be used in isolation to value any given cryptoasset. Despite the limitations of the valuation models addressed in this guide, they offer insights into the functionality and mechanics of the respective assets.

This guide is part of a series of initiatives around digital finance from CFA Institute Research and Policy Center intended to bridge the gap between regulators and the investment community and to connect the dots for academia and investors. Cryptoassets: The Guide to Bitcoin, Blockchain, and Cryptocurrency for Investment Professionals provides an introduction to core concepts. Additional resources include CFA Institute Global Survey on Central Bank Digital Currencies and Cryptoassets: Beyond the Hype.

Urav Soni  is an Affiliate to the Research and Policy Center at CFA Institute, and Rhodri Preece, CFA, Senior Head of Research at CFA Institute Research and Policy Center.