What Is the Role of Scenario Analysis in Forecasting Volatile DeFi Cash Flows?

Scenario analysis is crucial for forecasting volatile DeFi cash flows because it allows investors to model outcomes under different future market conditions, such as bull, bear, and stagnation scenarios. By assigning probabilities to various assumptions (e.g. user adoption rates, fee structures, regulatory changes), analysts can generate a range of potential intrinsic values rather than a single point estimate.

This process highlights the sensitivity of the valuation to key variables and provides a more robust risk assessment.