The State of Crypto report provides an in-depth look at the crypto industry over the past few months, as well as insights into crypto valuation frameworks.
ZURICH/NEW YORK, October 5, 2022 – 21Shares AG (“21Shares”), the world’s largest issuer of cryptocurrency exchange-traded products (ETPs) and a subsidiary of 21.coToday released the seventh edition of its State of Crypto Report – Our insight into valuation frameworks, the case for Cryptoassets.
The report provides an in-depth overview of the state of the crypto asset industry in recent months. In addition, it provides an update on the company’s original valuation methodology report first published in September 2020 – combining and building on previous efforts to develop a basic framework for determining crypto-asset valuations.
Currently, there is no industry-wide consensus on how to value cryptocurrencies. But given the rapid adoption of the crypto industry – which has grown 194% in the past two years from $390 billion to over $1.1 trillion in market capitalization – there is a clear need for a framework around the asset class. The aim of this report is to propose valuation methods that unify the different approaches investors have taken in recent years.
Key topics explored in the report include:
- The two approaches to valuing asset classes, including crypto: intrinsic valuation and relative valuation. The differences between each framework are below:
- Equity valuation links the value of an asset to its ability to generate cash.
- Alternatively, relative valuation (also called “pricing”) estimates how much to pay for an asset based on what others are paying for comparable assets.
- How investors can use relative valuation methods. This can be done in two ways – via “multiples” and market sizing:
- Multiples provide a standardized price estimate and help determine whether a given asset is undervalued or overvalued relative to its peers.
- Market size tends to be more appropriate for “stores of value” assets. This approach involves establishing a total addressable market (TAM) and a percentage the crypto asset can capture.
- How we measure the intrinsic value of crypto assets. Since cryptoassets are not all created equal, they cannot be valued using the same methods. The core difference from a valuation point of view between Proof of Work (PoW) and Proof of Stake (PoS) assets stems from the system on which the asset is built:
- PoW assets like Bitcoin are “crypto-commodities” – the result of an energy-intensive process called mining that is used to verify, settle transactions and secure the network.
- In comparison, PoS assets like Ethereum are capital assets and trade with high-energy mining for users on that asset’s network staking their own cryptocurrencies for transaction validation.
- As a result, the cost of mining bitcoin is best measured by intrinsic value, while a discounted cash flow method for Ethereum makes more sense.
“We put education at the core of our research and our team stands by free and publicly available content for investors of all backgrounds, whether retail or professional,” said Eliézer Ndinga, 21Shares Research Director. “We believe that crypto will disrupt and expand business models in financial services, e-commerce, art, music and more, but we are still at the beginning of this innovation. Amid market turbulence this spring and summer, it is more important than ever that industry knowledge is easily accessible to all investors, and we see this report as an important stepping stone in this mission.”
Today’s release follows closely launch by 21Shares’ parent company, 21.co, along with its $25 million funding round. In addition, the company recently launched its Crypto Winter Suite of products, including Bitcoin Core ETP, S&P Risk Controlled ETPs for Bitcoin and Ethereumand Card and Core Ethereum ETPs. Earlier this year, 21Shares published sixth edition of its State of Crypto Reportwhich explored current trends in the crypto industry and how investors are successfully optimizing their crypto portfolios.
Click to download the full report here. For more research from 21Shares, visit 21shares.com/research.
Press contacts:
Arielle Sobel, Head of Global Communications, [email protected]
Megan Enright, Communications Manager, [email protected]
About 21.co:
21.co is the world leader in providing access to crypto through simple and user-friendly products. 21.co is the parent company of 21 Sharesthe world’s largest issuer of cryptocurrency exchange-traded products (ETPs) – powered by Onyx, a proprietary technology platform used to issue and operate cryptocurrency ETPs for 21Shares and third parties – in addition to Amun, a token provider focused on making the world of DeFi more accessible. The company was founded in 2018 by Hany Rashwan and Ophelia Snyder. 21.co is registered in Zug, Switzerland with offices in Zurich and New York. For more information, please visit 21.co.
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