BasicsLevel 2Intermediate8 minUpdated 22 Oct 2026

Where does a crypto-asset's value come from?

There is no cash flow, so ordinary valuation does not work. Value comes from four factors, and disappears through the same ones.

Four factors instead of cash flow

The value of a share can be derived from earnings, and the value of a bond from its interest. A crypto-asset has neither. Instead, its value is explained by four factors, none of which is a forecast. Each is something you can observe.

Scarcity

How quickly new units are created, and whether the supply can be increased by a decision.

Use

How much the network is actually used: transfers, payments and applications.

Liquidity

How easily, and at what cost, a position can be opened and closed.

Global money

The level of interest rates and the liquidity in the markets. Crypto reacts strongly to both.

What lifts it, what weighs on it

The price of crypto is moved largely by the same forces as other risky assets, only more strongly. When money is plentiful and interest rates fall, risk-taking increases. When liquidity tightens, crypto typically falls first and furthest.

Lift

Falling interest rates and growing liquidity.
New regulated ways to own it (for example ETPs).
Slowing supply, such as the halving of the mining reward.
Growing use of the network and new use cases.

Weigh

Tightening monetary policy and rising real interest rates.
The collapse of a major player and a loss of trust.
Leverage unwinding in the derivatives market.
Regulatory uncertainty in key markets.

Why the swings are structural

The crypto market is young, open around the clock and has no trading halts. In the stock market, the overnight break and the exchange's safeguards calm panic; crypto has neither. On top of that, a large share of the volume is derivatives, where leverage can multiply a move in both directions.

It is worth accepting the consequence in advance: falls in value of more than 80 percent have happened several times, and nothing prevents one from happening again. This is not a flaw in the market but a feature of it.

Many people sell at the bottom because their weight was too large to bear, not because their view had changed.

What is used instead of valuation

Because there is no cash flow, professionals use indirect measures. None of them gives the right price. They give a framework for the discussion.

Measure	What it tells you	Limitation
Network use	Active addresses, the number of transfers and the transaction fees paid.	Use does not translate directly into value.
Supply model	How many new units are created relative to the circulating supply.	Demand is outside the model.
Realized value	The price at which the units on the chain last moved.	Tells you about the past, not the future.
Liquidity	The depth of the market, and how much a large order moves the price.	Changes quickly under stress.

This content is for information purposes only and should not be construed as investment advice or a recommendation. Investing always involves the risk of losing capital. The value of financial instruments and investments can go up or down, and past performance is no guarantee of future returns.

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