One of the biggest unaddressed issues in the crypto industry is the justification of the huge cryptocurrency valuations. When you hear that Ethereum is worth $250 billion, is that actually true, or are there things that don’t add up? Crypto projects like Dacxi’s community-based exchange platform seek to offer alternative approaches to the valuation of crypto assets.
To crypto traders, speculators, and gamblers, the underlying crypto valuation is of little or of no significance. Such groups of people are only interested in the price boom and how they can make quick money from such price movements.
For crypto assets to gain acceptance in the mainstream as a credible investable asset class, they have to justify their potential in financial terms and not just technical terms. Crypto coins will have to attain the level where financial investment companies and public wealth builders can be confident to invest and hold assets for the long term. For this reason, Dacxi and other crypto projects are pushing to have a discussion on the valuation of crypto-assets and their potential intrinsic financial value. Without a proper and financially acceptable valuation of crypto coins, it will remain just a speculative asset for short-term traders.
The Basics of the Current Crypto Valuation
Like its fiat counterpart, the current crypto valuation is largely determined by demand, supply and production costs. According to Edward Cooper, the head of crypto at Revolut, the utility of a crypto coin plays a vital role in its valuation. The caliber of people that make up the founding team and the technology of the protocol also impacts crypto valuation. Also, we have crypto assets whose value is not tied to utility; a good example is the meme coins like Dogecoin, Safemoon, CumRocket, etc.
Today, we also have external factors influencing the value of cryptocurrency. For instance, Elon Musk influenced the value of CumRocket to climb to nearly 400% simply by tweeting about it. He also crashed the market value of Bitcoin by more than 7% after raising concerns about the adverse environmental impact of Bitcoin mining. Therefore, there are a lot of things impacting the valuation of cryptocurrencies, but there is a need to have a more systemic approach to these things.
According to Diana Biggs, a former executive at HSBS, and currently, the leader of Valour, a cryptocurrency startup, the crypto market will remain under the influence of certain individuals until institutional investors begin to invest and break the hold of individual whales. However, more institutional investors will get involved if there is a change to the current crypto valuation.
The Dacxi Crypto Valuation Approach
Dacxi seeks to raise awareness of the valuation of cryptocurrency as a credible and investable asset class. Here, financial investment companies can invest major new capital as well as hold crypto assets for the long term. For example, the Ethereum coin (ETH) is used for the payment of blockchain fees. Therefore, the tokenization of the world economy can give rise to millions of tokens, generating billions of transactions. If the fee ranges from $1 to $50 per transaction, the potential value of Ethereum will be in trillions of dollars. We are talking about an Ethereum coin valued at $20,000-50,000.
Asset tokenization comes with a lot of micropayments; therefore, the fees must be very negligible. So, the $1 blockchain fee is way too high for these micropayments. The world can shift its attention to less expensive competitors if the price of Ethereum becomes too expensive. At this point, governments and even tech giants can launch less expensive blockchain platforms.
The Dacxi's community-based exchange focuses on the wealth-builders who buy and hold crypto assets for the long term. Just like the way people buy gold with the assurance that their investment is secure, Dacxi expects its customers to invest their money knowing it is safe and secure. The team believes that the advice to "only invest the money you can afford to lose" should only be given to gamblers walking into casinos - not to people serious about wealth building.
Dacxi believes that it is about time the crypto market has professional financial analysts like Tom Lee of Fundstat. The firm believes that the future of crypto assets is becoming a credible investable asset class.
The journey to crypto becoming credible as an asset class is likely a long one. However, platforms like Dacxi are creating the needed awareness and community of wealth-builders that make it seem this will happen, it’s only a matter of time.