On August 30, SATIS Group, an ICO advisory firm, issued the fourth installment in their five-part research series investigating the cryptocurrency movement. The series serves as an instructional and thorough evaluation of the cryptocurrency movement. Earlier reports evaluated critical components of the cryptocurrency movement including the technical underpinnings, network creation, and market composition.
The latest report, titled “Cryptoasset Market Coverage Initiation: Valuation,” explores new models for valuing digital assets, and makes predictions about the future of some of the most prominent cryptocurrencies.
With their most recent research, SATIS set out to determine the long-term value of cryptocurrencies by assessing their underlying metrics rather than relying on speculation and sentiment.
Determining the value of digital assets
Despite the rampant enthusiasm surrounding Bitcoin and other cryptocurrencies, they remain substantively novel technologies that are still primarily valued based on the speculative investments of novices. For instance, Bitcoin’s meteoric rise in 2017 from a digital asset valued at less than $1,000 to one that almost reached $20,000 is primarily attributable to enthusiasm and sentiment rather than fundamental changes in adoption rates or other tangible metrics.
SATIS is striving to change this approach with their latest research. The report describes several methodologies for valuing cryptocurrencies including a top-down valuation, peer-based valuation, and bottom-up valuation.
However, in an acknowledgment of the inherent challenge of adequately valuing digital assets, the report notes,
“This research is intended to show fundamental valuation of the assets under various scenarios and models, however the values above do not reflect timed and targeted prices. The models do not reflect fluctuations associated with network operation, manipulation, technical modifications, technical flaws, government regulation, or market risk.”
Of course, all of these factors play a considerable role in determining the value of cryptocurrencies.
Measuring by the metrics
In almost every way, the company’s conclusions are a boon for Bitcoin, estimating that the preeminent digital currency could hit $96,000 in five years. In addition, Monero and Decred could also see significant increases with SATIS’ price estimates reaching $18,000 and $535 respectively - based on their “unique value propositions within deep and viral markets.”
In conjunction, the report finds, currency and privacy networks appear best positioned to benefit from the growing prominence of cryptocurrencies.
Meanwhile, Bitcoin Cash, a derivative of Bitcoin, is less well-suited for long-term success because it's less popular than Bitcoin’s, and its underlying technology is mostly the same.
Perhaps the biggest loser in the report, Ripple, received a five-year valuation of $0.01 because, as SATIS notes, XRP and other currencies like it are “misleadingly marketed, not needed within their own network, and have centralized ownership/valuation.” Similarly, utility tokens are predicted to hold little value if the current crypto ecosystem remains the same.
Ethereum, one of the significant players in the crypto space, is poised for growth despite predictions that fewer platforms will be built upon the Ethereum blockchain. Even so, SATIS believes “ETH to be undervalued relative to the share of the cryptoasset market’s TAM [Total Addressable Market] it targets, considering the reputation and liquidity it has built around it (which we do not think will dissipate as quickly).”
Much of what passes for cryptocurrency assessments is actually little more than predictions based on sentiment and aspiration, so the SATIS report’s methodology stands out as a different, and perhaps more precise, predictor of future growth.
However, as the company acknowledges, cryptocurrency proliferation and value are still very much determined by communities of people and their participation in the crypto ecosystem. As SATIS explains,
“we continue to see upside in networks that have cultivated relatively organic growth and community."
In this way, cryptocurrencies continue to distinguish themselves from other financial products. They are a unique combination of underlying fundamentals and consumer sentiment that produces what is, to this point, a continually expanding digital ecosystem. For Bitcoin and a few other digital currencies, SATIS believes that trend will continue well into the future.
Image from Pixabay.