What Is the Challenge in Determining the Fair Market Value of an NFT?
The primary challenge is the lack of standardized valuation models and low liquidity compared to fungible tokens. NFT value is often subjective, driven by community sentiment, historical sales, and perceived rarity.
This illiquidity and subjectivity make it difficult to establish a reliable, real-time price feed, which is crucial for calculating loan-to-value ratios for collateral.
Glossar
NFT
Provenance ⎊ Non-Fungible Tokens, within cryptocurrency markets, represent a unique cryptographic token linked to a specific digital or physical asset, establishing verifiable ownership and authenticity.
Standardized Valuation Models
Calibration ⎊ Standardized valuation models, within cryptocurrency and derivatives, necessitate rigorous calibration to reflect the unique characteristics of these markets, diverging significantly from traditional finance assumptions.
Nft Valuation
Provenance ⎊ The assessment of non-fungible token (NFT) valuation within cryptocurrency, options trading, and financial derivatives necessitates a rigorous examination of provenance, extending beyond mere ownership history.
Fair Market Value
Benchmark ⎊ This value represents the consensus price at which an asset or derivative contract would trade between two informed, willing, and uncoerced counterparties in an efficient market.