Unveiling the true value of cryptocurrencies: Key insights from Parth Chaturvedi of CoinSwitch Ventures

Understanding the Intrinsic Value of
There's a prevalent narrative that questions the intrinsic value of cryptocurrencies, suggesting they lack any underlying value. However, this perspective often stems from a lack of comprehensive understanding of the space. For instance, consider a simple statistic from last year: the network, a prominent , generated over a billion dollars in fees. Traditional finance experts have devised models treating these fees as a proxy for discounted cash flow, akin to valuation techniques applied to stocks.

Evaluating Crypto Assets Individually
To grasp the value of crypto assets, it’s crucial to approach each one individually. The lens through which we evaluate each asset should be calibrated to its unique purpose. For instance, operates as an application-specific blockchain primarily facilitating value transfer across the internet. On the other hand, Ethereum serves as a general-purpose blockchain enabling the development of decentralized applications (DApps). Understanding this dichotomy is pivotal. Bitcoin’s fundamental value lies in its role as an inflationary hedge or a safeguard against monetary debasement, while Ethereum’s value stems from its capacity to generate platform and network fees.

Bitcoin’s Value Proposition
Bitcoin’s value proposition is straightforward: a store of value with a fixed supply of 21 million coins. Its periodic halving events, which reduce the supply of new Bitcoin, typically lead to price appreciation under stable demand conditions. This narrative has attracted institutional , evident in recent reports of state pension boards purchasing Bitcoin ETFs post-approval. Bitcoin boasts the status of the oldest and most battle-tested blockchain network, rendering it the benchmark for decentralization.

Ethereum’s Unique Role
Conversely, other crypto assets should be likened more to high-growth tech stocks or platforms. Ethereum epitomizes this category, functioning as a protocol that facilitates the creation of various applications, each generating transaction fees. , a reputable institution, recently released a report analyzing Ethereum’s protocol economy. The report highlights Ethereum’s capacity as a cash flow generator, citing its substantial fee generation, albeit with a 44% reduction in 2023 due to varying network usage. Notably, a portion of these fees is allocated to validators, while the remainder is burned, exerting upward pressure on Ether’s price.

Leveraging Tools for Crypto Valuation
To assist investors in navigating the crypto landscape, I aim to showcase some essential tools, most of which are free and readily accessible.


CoinGecko is an excellent starting point for understanding various crypto assets. While many use CoinMarketCap, CoinGecko's user-friendly interface makes it my preferred choice. It provides a ranked list of cryptocurrencies based on their market capitalization. For beginners, filtering by market cap or top rankings is advisable, focusing on the top 100 cryptocurrencies or those with a market cap exceeding $1 billion. This approach simplifies the selection process, akin to distinguishing between blue-chip and small-cap equities.

On CoinGecko, essential information about a specific coin, such as Avalanche (AVAX), is readily available. Two critical metrics to consider are fully diluted valuation and 24-hour trading volume. Adequate trading volume ensures liquidity, facilitating seamless transactions. For instance, Avalanche recorded a trading volume of $371 million in the last 24 hours, indicating high liquidity conducive to easy position management. Fully diluted valuation offers insights into a token's potential market cap if all tokens were in circulation. This metric varies significantly among crypto assets. For example, exhibits a fully diluted market cap substantially higher than its current market cap due to a significant portion of tokens being held by insiders or early investors. This imbalance may lead to selling pressure when these tokens become available for circulation.

Token Supply Dynamics
Understanding token supply dynamics is crucial. Unlike Bitcoin, where supply is fixed, most tokens have initial investors holding significant portions of tokens subject to vesting schedules. Tools like offer insights into upcoming token unlocks, which could impact token prices due to increased supply.

Token Unlocks displays a list of tokens with linear or cliff vesting schedules, indicating when tokens become available for sale. It's crucial to assess the potential impact of these unlocks on token prices, considering factors like trading volume and the magnitude of new supply entering the market.


Token Terminal provides a comprehensive fee calculator for different protocols and platforms. For instance, Ethereum has generated $1.8 billion in fees over the last 180 days, making it a significant revenue generator. By exploring various sectors like gaming or lending, investors can identify top fee-generating protocols and make informed investment decisions.


DeFi Llama is an essential resource for checking Total Value Locked (TVL) across different chains and protocols. TVL represents a sign of confidence in a particular chain or protocol, similar to how banks garner deposits as a measure of trust. For instance, Ethereum boasts over $100 billion in TVL, far surpassing its closest competitor, Tron, at $8 billion. DeFi Llama offers a comprehensive suite of features, including the number of addresses, protocols, changes in TVL over different timeframes, and even 24-hour fee generation data.

DVR
Developed by Hitesh, DVR integrates various tools into a single platform, offering insights into crypto growth metrics like TVL, fees, and token holders' growth. This tool equips beginners with the necessary resources to navigate the crypto space effectively.

Understanding the fundamental value of crypto assets requires a nuanced approach. Each asset must be assessed independently based on its purpose and functionality within the broader ecosystem. By leveraging publicly available tools like CoinGecko, Token Unlocks, Token Terminal, and DeFi Llama, investors can gain valuable insights into market dynamics, token supply dynamics, and fee generation, facilitating informed decision-making in the crypto space.

It's important to conduct thorough due diligence and stay informed about market trends. The combination of fundamental understanding, strategic analysis, and leveraging powerful tools will empower investors to navigate the crypto landscape with confidence and capitalize on emerging opportunities.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

Source: Forex-Markets-Economic Times