Intrinsic Value vs Market Price: The Difference Every Investor Must Understand

When trading cryptocurrencies/stocks, you often hear two concepts that are easily confused: Intrinsic Value and Market Price.

In simple terms:

• Intrinsic Value = The “true value” calculated based on financial data, growth potential, competitiveness, etc., typically using discounted cash flow analysis.
• Market Price = The real-time price at the current exchange/market, determined by supply and demand, sentiment, policies, etc.

Why Distinguish?

Market prices are easily held hostage by emotions. A BTC news article or a tweet from Musk can cause a 10% price fluctuation, but that doesn't mean the “real value” of Bitcoin has changed. This is why experienced investors focus on Intrinsic Value – to help you identify whether an asset is overvalued or undervalued.

Intrinsic Value needs to be calculated by yourself, there is uncertainty, but it can guide your “buy low sell high” strategy. The market price is available to you at any time, but it only reflects the current supply and demand relationship, and does not necessarily reflect the future growth potential of the asset.

Practical Applications

Economic policies, interest rates, and geopolitical factors can rapidly change market prices, but they do not necessarily change the asset's Intrinsic Value. Sometimes this deviation is an opportunity—or a risk.

Conclusion: Before investing, look at these two indicators simultaneously to determine whether the asset is undervalued/overvalued/fairly valued, so that you can make a more rational decision.