Article Image

News Link • Currencies

Intrinsic Value Of Crypto: What Is It & How To Calculate It

• https://www.zerohedge.com, by Onkar Singh

Common methods to calculate intrinsic worth of a cryptocurrency include Metcalfe's Law, cost of production and discounted utility models.

Estimating intrinsic value is challenging due to market volatility and speculative data.

Fiat currencies have no intrinsic value, relying on trust, while cryptocurrencies' value is based on decentralization and scarcity.

Intrinsic value refers to the actual worth of an asset based on its fundamental characteristics, rather than its market price. For example, in traditional finance, the intrinsic value of a stock is often derived from factors such as earnings, cash flow and growth potential.

In cryptocurrencies, it's not so straightforward. Since crypto assets are not tied to physical entities or consistent income streams like dividends, assessing their intrinsic value involves a mix of factors — technological, economic and utility-driven. In simple terms, intrinsic value answers the question: What makes this cryptocurrency valuable beyond its price on an exchange?

The intrinsic value of cryptocurrencies is derived from factors such as:

Utility: What problems does cryptocurrency solve?

Scarcity: Is the supply limited or inflationary?

Network value: How large and active is the ecosystem?

Security: How resilient is the blockchain against attacks?

For example, Bitcoin's BTC$106,649 intrinsic value lies in its fixed supply (21 million coins), decentralized network and security powered by proof-of-work (PoW) mining

On the other hand, Ethereum derives much of its value from being the backbone of decentralized applications (DApps) and smart contracts


midfest.info