Cryptocurrency Valuation – Crypto Token Valuations and Compliance
Redwood is a leading provider of token valuations and works with top law firms and cutting-edge companies to ensure that their token issuances are fully compliant. A token valuation is needed in the instance that a company wishes to grant employees deferred compensation in the form of token grants or related grants (SAFTs, SAFTEs, etc.). In this case, the IRS will require that there be an established fair market value as the of the grant date. Many firms are not equipped to perform these valuations as they may not understand the industry or have not performed many token specific valuations. At Redwood, we understand the intricacies of the crypto space, including the legal and technical relationships between the companies and their foundations or related entities (when relevant), the unique market position that crypto tokens operate in, and the various validation methodologies behind transactions.
The Purpose of Cryptocurrency Valuation
A Token Valuation is used to fair value a crypto-token. Typically, these are performed for compliance, strategic, and tax purposes, most commonly before the issuance of token based deferred compensation.
We are one of the few valuation providers that are equipped to perform Token Valuations. Our deep understanding of crypto markets and the complex legal nuances of crypto-based companies sets us apart from other valuation providers. We take a number of different approaches when valuing tokens and make sure to understand the unique intricacies of the token and issuing entity.
How is the value of cryptocurrency calculated?
Just as with other valuable items, the value of a cryptocurrency is determined by supply and demand. If more people want it than there are available coins or tokens in existence then its price will go up.
Who decides the cryptocurrency price?
Cryptocurrency’s price is primarily affected by supply. The market demand for it, availability and competing cryptocurrencies also influence the value of cryptocurrency; however investor sentiment plays an important role as well since buyers will bid up prices when they feel confident about their investment prospects.