What is Intrinsic Value?
Let's find out Intrinsic Value meaning, definition in crypto, what is Intrinsic Value, and all other detailed facts.
In the financial world, an asset has a current value and an intrinsic value. The difference between these two is that intrinsic value represents its actual worth based on its recent performance and other factors affecting it in the long term. The current value, on the other hand, is the price of an asset at a given moment.
In the traditional financial world, the intrinsic value of an asset is closely linked to the underlying valuation of the company that uses the asset. A company's underlying value is defined by its cash flow, future earnings, and other factors, thus, intrinsic value is defined by the same things. Therefore, if a company is performing well, the intrinsic value will be higher, but if it’s experiencing some hardships, the intrinsic value will drop.
In the world of cryptocurrencies, the token’s intrinsic value is also influenced by the company or people behind the project, as well as the goal of the project. For instance, the creator of Bitcoin, Satoshi Nakamoto, is an intriguing character about whom we barely know anything. That could affect the intrinsic value of Bitcoin in a bad way, however, the goals of Bitcoin wield enormous power which pushes the token’s intrinsic value upward.
Because of the numerous factors that can influence the construction of an asset's intrinsic value, it is a pretty abstract number. Therefore, financial analysts have complex algorithms to calculate it as precisely as possible. However, in the crypto world, it might be a bit harder to determine the token’s intrinsic value but, with the right amount of research, it’s not impossible.