The Importance of Valuing Cryptocurrency: A Professional Investor’s Perspective
Franklin J. Parker, CFA, is the author of Goals-Based Portfolio Theory, published by Wiley.
It was a sunny afternoon by Lake Maggiore in Italy, where I found myself in a thought-provoking discussion with a fellow investment professional. As we delved into the topic of cryptocurrency – an area that had always intrigued me but left me hesitant to invest – a pivotal question surfaced: How do you truly value bitcoin?
Despite my genuine curiosity and desire to be part of this evolving asset class, the lack of a coherent valuation model, especially when it comes to determining the right time to buy and sell, has kept me on the sidelines.
As a professional investor bound by a fiduciary standard, the need for a sound pricing model that goes beyond mere speculation is paramount. While the allure of bitcoin and blockchain technology is undeniable, without a clear framework for evaluation, making informed investment decisions remains a challenge.
As I reflect on missed opportunities and the inherent uncertainties surrounding cryptocurrency investments, I am reminded of the profound significance of having a structured approach to valuing this nascent asset class. It is not enough to believe in the future potential; one must also have a rational basis for making investment decisions.
With that said, I urge all crypto experts to bridge this valuation gap and provide the professional investment community with a comprehensive framework for evaluating and managing cryptocurrency portfolios. Only then can we confidently address the question that has eluded us for so long: At what price?
For more from Franklin J. Parker, CFA, check out Goals-Based Portfolio Theory and follow him at Directional Advisors.
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