The cryptocurrency space is experiencing significant confusion regarding token evaluation due to discrepancies in data presented by different providers. This could lead to potential losses for investors, especially when conventional comparison metrics with stocks do not work.
Issues with Current Token Valuations
For years, traditional token valuation has relied on two key metrics that distorted comparisons with stocks. Fully Diluted Valuation (FDV) is calculated by multiplying the token price by the maximum supply, creating false representations of value. This methodology evaluates companies based on maximum shares rather than the actual issued ones.
Introducing the Outstanding Supply Framework
The 'Outstanding Supply' framework introduced by Artemis and Pantera Capital aims to standardize token valuation by excluding tokens controlled by the protocol from calculations, allowing for a more accurate reflection of token value for investors.
Potential of the New Approach for Investors
The framework delineates different supply metrics: Total Supply analogous to issued shares, Outstanding Supply to circulating shares, and Circulating Supply considering only unrestricted shares. This highlights transparency and enables more precise financial assessments and validations of tokens, potentially enhancing institutional investment opportunities in the crypto space.
Eliminating discrepancies in token evaluations and providing standardized metrics could foster greater trust among investors and expand opportunities for traditional financial institutions in the cryptocurrency market.
