How Is the Capital Asset Pricing Model (CAPM) Adapted for Cryptocurrency Valuation?

CAPM is adapted for crypto by using a modified beta coefficient that measures the token's volatility relative to a broad crypto market index (like the total crypto market cap or a large index fund) instead of the traditional stock market. The high-risk nature of crypto also necessitates a higher market risk premium.

The resulting required rate of return is then used as the discount rate in a DCF model.