In this week’s episode of Hidden Forces, host Demetri Kofinas speaks with Chris Burniske about how to value a cryptocurrency. Chris is a co-founder of Placeholder, a New York venture firm that specializes in cryptoassets. Before Placeholder, Chris Burniske pioneered ARK Invest's Next Generation Internet strategy, leading the company to become the first public fund manager to invest in cryptocurrency. He then transitioned to focus exclusively on cryptoassets, paving the way for Wall Street to recognize it as a new asset class. His commentary has been featured on national media outlets, including the Wall Street Journal, the New York Times, Fortune, and Forbes.

With the total market capitalization of all cryptocurrency having surpassed $800 billion by the start of 2018, it was only a matter of time before Wall Street would stand up and take notice. The establishment of a cash-settled futures market for bitcoin in late 2017 is one of many bullish signs for the long-term viability of cryptoassets. It has also opened the door to further institutional capital and crypto-focused hedge funds with hundreds of millions of dollars to deploy. The opportunities for profitmaking are too lucrative to ignore, but the flood of institutional and private capital into the cryptocurrency space is also fueling a speculative mania. The newness of this asset class and its lack of historical price data make proper valuations even more challenging. So, given these constraints, the question remains, how do you value cryptocurrency?

The answer lies at the intersection of macroeconomics and financial modeling. Chris Burniske and Demetri Kofinas start by laying out a taxonomy for cryptoassets that breaks them into three categories: cryptocurrency, cryptocommodities, and cryptotokens. In their conversation, they explore how one can learn to differentiate between the different currencies, DApps, and tokens. How does one judge the merits of a white paper, the seriousness of the dev team, and the enthusiasm of early adopters? How important is governance? How can volatility in the underlying token impact the robustness of the software? How do supply schedules determine future values? What are some of the most reliable, early indicators of success or failure for a cryptoventure? These are just some of the questions that Demetri and Chris address in this highly informative and timely conversation.

Producer & Host: Demetri Kofinas

Editor & Engineer: Stylianos Nicolaou

Join the conversation at @hiddenforcespod

Chris Burniske is a co-founder of Placeholder, a New York venture firm focused on the economics and governance of cryptonetworks. Prior to Placeholder, he worked at ARK Investment Management as the first buy-side analyst to cover cryptoassets, driving the firm's decision to invest in bitcoin in 2015.

In addition to his work as an investor, Chris co-authored the best-seller, Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond (McGraw Hill, 2017). His commentary has been featured on national media outlets, including the New York Times, Wall Street Journal, Bloomberg, Fortune and more.

@cburniske