A Valuation Framework is a structured methodology or set of principles utilized to determine the intrinsic or fair market value of an asset, company, or project. In crypto, this framework addresses the unique challenges associated with valuing digital assets.
Mechanism
It typically involves applying various models such as discounted cash flow (DCF) for revenue-generating tokens, comparable analysis for market-traded assets, or cost-based approaches for infrastructure projects. For crypto, it often integrates network effects, utility, tokenomics, and developer activity metrics alongside traditional financial indicators.
Methodology
The objective is to provide a consistent and justifiable basis for investment decisions, risk assessment, and financial reporting. This framework adapts conventional valuation techniques to the specifics of digital assets, accounting for their decentralized nature, technological utility, and speculative components. It thereby offers a rational basis for price discovery and capital allocation in crypto investing.
Applying best execution to illiquid assets requires a systemic shift from price verification to a structured, evidence-based process of price discovery.
A determining party justifies its valuation methodology by constructing a transparent, replicable, and documented system based on established frameworks like ASC 820.
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