How much is Bitcoin and Co. really worth it?

Many still see no discernible value in cryptocurrencies. The head of the American bank JP Morgan, Jamie Dimon, recently even called Bitcoin a “decentralized Ponzi scheme”.

The world’s largest issuer of exchange-traded cryptocurrency products (ETPs), 21Shares AG, shows why this is not the case. The subsidiary released the seventh edition of its State of Crypto Report on October 5. Here she presents possible rating systems for cryptoassets, from which it should be clear what Bitcoin and Co. really worth it.

Objective or relative?

According to 21Shares, there are basically two ways to assess the value of a cryptocurrency, internal (intrinsic) valuation and relative valuation. The internal evaluation is dependent on fundamental parameters such as cash flow, risk or growth. The value can be measured almost objectively.

The opposite is the case with the relative valuation of a coin or token, which is highly dependent on sentiment, narrative or supply and demand. This backlash results in a gap (“The Gap”) of fundamental value and price. Therefore, the smaller the difference, the more realistic the price.

The gap between fundamental value and price | Source: 21Shares / “State of Crypto” #7

According to 21Shares, in the absence of objective evaluation, asset prices tend to be very exuberant, comparable to the times of the dot-com or crypto-ICO bubble.

Crypto Categorization

The authors of the report divide cryptocurrencies into five categories: Proof-of-Stake (PoS) blockchains, Proof-of-Work (PoW) blockchains, utility tokens, governance tokens and NFTs (non-fungible tokens). These are in turn assigned an “active superclass”.

Proof-of-stake tokens, for example, can be considered “cryptoassets” because of the recurring revenue generated via stake rewards, according to 21Shares. Proof-of-work coins, on the other hand, would be more like a “crypto raw material” due to their energy-intensive production.

The main difference between utility and governance tokens in the latter is the participation in the network contained in the token and the right to vote. Governance tokens should therefore be of interest to large investors in light of the fact that they behave very similarly to traditional shares in a company. The community on the decentralized exchange Uniswap recently voted in favor of a new fee model where token holders participate in the trading fees incurred by the platform – crypto-dividends, so to speak.

The almost completely subjective value perception of NFTs makes them pure collectors’ items or valuables, similar to a painting. They are therefore largely subject to a sentiment-driven valuation.

Crypto capital, commodity or store of value | Source: 21Shares / “State of Crypto” #7

Like their financial equivalents, well-known valuation methods can then be applied to these superclasses. A corresponding price for the respective crypto asset can then be determined based on this. This varies depending on the method, but provides information about a possible under- or overestimation.


Ethereum, as a PoS asset, for example, could be priced between $923 and $4,000 based on a fundamental valuation method, according to 21Shares. On the other hand, if you evaluate it relatively, for example, in relation to an aggressively growing company like Tesla, an Ethereum price of up to 16,000 US dollars per token can be calculated.

Mean Ethereum Price | Source: 21Shares / “State of Crypto” #7

According to the authors, the basic price of the “crypto commodity” Bitcoin will be in the range between 12,000 and 20,300 US dollars, taking into account the current production costs. A relative price can be determined via “market sizing”, i.e. the size comparison with a target market. For example, Bitcoin at 20 percent of the gold market would have a price of about $115,000 per coin. coin.

Implied Bitcoin Price | Source: 21Shares / “State of Crypto” #7

A combination of the objective and relative assessment methods would be optimal in certain cases. According to 21Shares, a relative valuation is possible in almost all cases. However, the report also provides information on possible limits.

Realistic prices?

However, the stated prices are conceivable. Especially when capital-rich institutions invest in the crypto sector. A small part of their portfolios would be sufficient. If the world’s largest banks allocate just five percent of their capital to the crypto sector, it will be equivalent to an investment of nine quadrillion US dollars. Tripled crypto’s total market capitalization to record highs during last year’s bull market.

It is therefore no wonder that large financial institutions do not want to let this opportunity pass them by. Big names like BlackRock or Fidelity have long been available with large sums for the crypto sector. An industry-wide consensus on the valuation of cryptocurrencies, as proposed by 21Shares, would certainly help them.

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