Fair Market Value (FMV) in accounting is the estimated price at which an asset would change hands between a willing buyer and seller. In crypto accounting, this could be the price of a cryptocurrency at a given time.
Fair Market Value (FMV) is a critical term in both the financial world and the rapidly evolving landscape of cryptocurrencies. It refers to the rational and unbiased estimate of the potential market price of a good, service, or asset. It represents the price that would be agreed upon by a willing buyer and a willing seller, each with a reasonable understanding of relevant facts, and neither compelled to conclude the transaction.
The process of determining FMV often involves comprehensive market research, assessing the condition and quality of the asset, and comparing it with similar assets traded in the marketplace. For instance, in real estate, this might involve comparing the property with recent sales of similar properties in the same area.
In the context of cryptocurrencies, the FMV could be established by referring to the trading price on a given cryptocurrency exchange at a specific time. Given the volatile nature of cryptocurrencies, prices may differ across various exchanges due to factors such as supply and demand, trading volume, and market sentiment.
The FMV of Bitcoin at the time of a transaction
