Some time ago, I confessed to CapX readers my unease about pricing cryptocurrencies such as bitcoin.
I wasn’t alone in my hesitation: New York University finance professor Aswath Damodaran has voiced scepticism that assets with no cash flows can be valued, in the financial sense of estimating what the future payoffs from holding the asset are worth. Not to mention the ranks of academic luminaries, from Yale bubble-spotter Robert Shiller to central banking maestro Alan Greenspan, who have questioned the cryptoasset boom.
Yet, despite forebodings from the ivory tower, someone is doing the pricing. But 2018 is so far proving a bear market. The price of bitcoin has dropped from $11,000 at the start of March to under $7,000 today, having in the three months prior reached $17,500. Other popular cryptocurrencies such as Ethereum and Ripple have similarly traced a downward path since January.