Note: To avoid confusion, think of demand as the combined willingness to hold or use a token at a given price, including the demand from current token holders.
We further believe that demand can be decomposed into Fundamental and Speculative demand. Speculative demand is typically erratic, unpredictable, and impossible to quantify. Fundamental demand, on the other hand, is typically slower moving, more persistent, and quantifiable.
Long term, fundamental demand will dominate and can be understood as a trend or driver around which speculative demand fluctuates. Hence, as a long-term investor, it is key to have a good understanding of the fundamental value drivers of an asset. Having a clear understanding of the fundamentals will both expose the relative size and direction of speculative demand and form the basis for developing long-term investment hypotheses and scenarios.
To provide investors with a toolset to do exactly this, we are developing a framework for assessing the fundamental value of a cryptocurrency token. The framework is a work in progress and can be severely altered as we learn more. Currently, we are conceptually dividing the fundamentals of a token price into three main components;