How Is the Discount Rate (WACC) Determined for a Highly Volatile Crypto Asset?

The discount rate for a crypto asset must reflect its high risk and volatility, making traditional WACC calculation difficult. Instead of a standard equity risk premium, investors often use a higher required rate of return, sometimes ranging from 20% to over 50%.

The rate should account for market risk, regulatory risk, and protocol-specific risks like smart contract failure. A common approach is to start with a risk-free rate and add substantial, empirically derived risk premiums specific to the crypto sector.