How do you value cryptocurrency?

• Crypto can be harder to value than stocks and bonds because most cryptocurrencies don’t generate dividends or interest that can help anchor their value—so prices often depend on adoption expectations and sentiment.
• Investors may use “relative value” approaches, such as comparing crypto with gold or the money supply, to test their assumptions about potential future price levels.
• “On-chain” valuation techniques look at a cryptocurrency’s market value relative to activity-based metrics like historical network-security spend and transaction fees.
• Cyclical indicators compare how Bitcoin’s price is trending in the current cycle relative to a similar point in previous cycles.
• Valuation approaches offer only reference points: Crypto is highly speculative and volatile, and regulation or operational failures can shift outcomes fast.

Crypto markets are known for big rallies and sharp pullbacks, with bouts of extreme volatility often prompting investors to ask: What is crypto really worth? Crypto valuation techniques can help provide a structured yardstick for thinking about value and risk.

Investors try to value assets to decide what they think is a fair price and then compare that to the market price. This can help them avoid overpaying, spot when optimism may already be priced in, and compare opportunities across different assets using a consistent framework.

But valuing crypto can be harder than valuing traditional assets like stocks or bonds. That’s because most cryptocurrencies don’t generate cash flows like dividends or interest that can help anchor what they’re worth. As a result, crypto prices often depend more on expectations about future adoption and still-evolving valuation approaches.

There is no broadly accepted industry standard for valuing cryptocurrencies. While crypto valuation techniques are still debated and evolving, investors may want to consider a few key approaches:

1. Relative value

Relative value is about comparing one asset to a “peer” or reference point to help frame what it might be worth.

Bitcoin vs. gold (store-of-value comparison)

Some investors compare Bitcoin to gold by asking: If both are used as “store of value” assets, how big could Bitcoin’s share eventually be?

• Hypothetical example: Let’s say an investor believes that because Bitcoin is easier to store and transfer digitally, it should eventually capture 10% of the global market for gold. If Bitcoin’s total market cap is only 5% of gold’s, the investor might judge it as undervalued . Alternatively, if Bitcoin’s market cap has grown beyond the investor’s 10% target share, they might see it as overpriced relative to that assumption.

Bitcoin vs. money supply (M2)

Investors may also compare Bitcoin to broader pools of liquid wealth, such as the “M2” money supply, which includes cash and checking deposits, plus “near money” like savings deposits, money market securities, mutual funds, and other time deposits.

This framework can be used in two basic ways. First, investors may compare Bitcoin’s market value with the M2 money supply of individual countries. Second, they may compare Bitcoin—or the broader crypto market—with total global M2.

The idea is not that Bitcoin is literally a country’s currency. Rather, because Bitcoin is mostly digital and has its own global user base, some investors think of Bitcoin users as forming a kind of virtual economy. They may then compare Bitcoin with the currencies of other economies. For example, in money-supply terms, Bitcoin has been closer in size to the Canadian dollar and Australian dollar than to the largest global reserve currencies. But size is only one part of the comparison: Bitcoin might look relatively attractive on some measures, such as its predictable supply growth, but less appealing on others, including its shorter history and much higher volatility.  

• Hypothetical example: Imagine that an investor assumes Bitcoin could plausibly absorb about 2% of global M2 over time. If Bitcoin were currently valued at about 4% of global M2, that investor might view it as overpriced relative to that reference point. However, if it were valued at 1%, the same investor might see more room for potential appreciation, assuming adoption grows as expected.

Importantly, these are “what if” frameworks, not forecasts. A relative-value comparison doesn’t prove where a cryptocurrency should trade—it only shows what assumptions would need to be true for certain price levels to make sense.

2. On-chain metrics

In stocks, investors often look at a price multiple of a business metric like earnings. In crypto, investors try something similar, but instead of earnings, sales, or book value, they use “on-chain” activity as the fundamental reference point.

Market-cap-to-thermocap ratio

One Bitcoin-specific metric is “thermocap,” which can be thought of as a rough crypto version of book value. It is calculated by adding up the dollar value of newly-minted Bitcoins over Bitcoin’s history (i.e., the number of Bitcoins mined each day multiplied by that day’s market price).

Because crypto miners generally spend money on energy and equipment to earn those new Bitcoins, thermocap is often interpreted as a rough measure of the cumulative capital spent to help run and secure the Bitcoin network. In simple terms, it tries to estimate how much money has historically gone into maintaining Bitcoin’s security (not what Bitcoin is guaranteed to be worth).

Investors who compare Bitcoin’s market cap to its thermocap often view the multiple as a gauge of investors’ willingness to pay relative to cumulative security spend on the network. That is similar in spirit to how a bank stock’s price-to-book (P/B) ratio compares the bank’s market value with the capital built up in the business. A higher market-cap-to-thermocap ratio may suggest investors are paying a larger premium for potential future growth and adoption, while a lower ratio may suggest enthusiasm has cooled.

• Hypothetical example: If thermocap were estimated at $100 billion and Bitcoin’s market cap at $2.5 trillion, that would imply 25x. If an investor believes Bitcoin has historically looked “stretched” when the multiple rises above, say, 40x, and “cheap” when it falls below 15x, they might see 25x as neither particularly inexpensive nor overheated.

Usage-based crypto multiples

Other investors, especially those valuing crypto from smart-contract platforms like Ethereum, may look at metrics tied to blockchain usage such as:

• price-to-transaction-fees, which compares a network’s market value to the fees users pay to transact on it
• price-to-total-value-locked (TVL), which measures the value in dollars of all the tokens issued by a platform

These metrics are still debated in a fast-changing market and should be treated as reference points, not a definitive measure of intrinsic value nor a guarantee of future results.

3. Cyclical/technical signals

Still other investors use cyclical and technical indicators to judge where crypto may sit in a broader cycle and how risky the setup looks, especially for shorter-term investing decisions.

For example, Bitcoin often gets discussed in a cycle framework because certain supply dynamics are known in advance over a repeating four-year cycle, which leads some investors to compare the current move to prior cycles.

• Hypothetical example: If price gains are much larger than in prior cycles at the same stage, an investor might treat that as a sign that sentiment is running hot. If gains are smaller, they might conclude the market looks earlier in the cycle.

Similarly, some investors may use a seasonal lens to gauge Bitcoin’s value based on how the price has historically trended through repeating phases of accumulation, momentum, euphoria, and drawdowns across four-year cycles.

Just remember: Cyclical patterns can help frame scenarios, but they’re descriptive, not predictive—and historical crypto cycles may not repeat, especially if market structure or other risks disrupt the cycle.

Important information regarding hypothetical scenarios

The examples in this communication are provided for educational and illustrative purposes only. They are hypothetical scenarios designed to show how certain valuation concepts may be applied to crypto assets under selected assumptions. They are not forecasts, projections, price targets, investment recommendations, or guarantees of future value, performance, or investment results.

There’s no single, widely accepted way to pin down what a cryptocurrency may be “worth.” Instead, some investors may consider a mix of relative comparisons (like bitcoin vs. gold or money supply), observable on-chain activity as a reference point, and cyclical/technical signals to frame scenarios and manage risk.

Importantly, these approaches aren’t guarantees. Crypto is generally highly speculative and can be extremely volatile, including the possibility of losing the full amount invested, and outcomes can be shaped quickly by operational issues, market structure, and regulatory developments.

This article is based on the Global Investment Office primer, "Investing in Cryptocurrency," published August 5, 2025.

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