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Offline bytemaster

BTSX Valuation based upon standard P/E ratio of 20.
« on: September 10, 2014, 04:05:08 AM »

When attempting to value a company one of the primary metrics that can be used is the earnings per share and the resulting P/E ratio.   You can view BitShares systems as companies that earn revenue from transaction fees and have expenses paid to people providing resources to the company.

I have put together a basic chart that shows the earnings BTSX would see at various transaction rates and trading volumes and then assumes an industry average 20 P/E ratio to derive an expected market cap valuation for the network.


Based upon these numbers the valuation of BitShares X with 1 transaction per second and $500K volume per day on the internal exchange is $62 million dollars.   However, if the internal exchange volume reaches similar levels to the external exchanges today, then the expected transaction rate would yield a valuation of $300 million dollars.    Once the exchange volume hits $10 million per day, the resulting transaction volume of 10 transactions per second the valuation would be about $700 million dollars.   

These valuations are based entirely on P/E ratios which are clearly not sufficient for valuing a crypto-currency.   Bitcoin for example has huge negative earnings, a transaction rate of less than 5 TPS and a valuation over $5 billion.     Using Bitcoin as a metric we could claim that a network is worth about $1 billion per TPS.    The vast majority of Bitcoin transaction volume occurs on exchanges, with BTSX many of the on-exchange trades will move onto the protocol itself and thus BTSX should have on-network transaction volumes equal to Bitcoin in a much shorter period of time.


The assumed P/E ratio of 20 implies a 5% ROI; however, most banks these days give depositors less than 1% ROI.   If BTSX is able to maintain its peg by backing bitUSD with BTSX and can share the transaction fees with bitUSD holders, then the demand for bitUSD will be enormous.   Due to the collateral system that requires effectively 3x the value of all bitUSD deposits to be held as collateral in BTSX, we can estimate the value of BTSX to be about 3x the demand for USD deposits at 5% ROI.   Considering the vast sums of money currently tied up in low-yield treasuries, savings accounts, etc the demand for bitUSD will be enormous. 

Of course, the more bitUSD that is created and “held” without corresponding transaction volume, the lower the ROI will become until supply equals demand. 

All of this is to say that the fundamentals on BTSX are very strong when analyzed like a traditional business and even stronger when compared to other crypto-currency systems on the market.   




 



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Offline ripplexiaoshan

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Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #1 on: September 10, 2014, 04:39:22 AM »
The trumpet to fight with bitcoin is finally sounded?   +5% +5% +5%
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Offline yellowecho

Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #2 on: September 10, 2014, 04:49:23 AM »
696c6f766562726f776e696573

Offline bitrose

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Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #3 on: September 10, 2014, 05:08:11 AM »
 +5% :D
Please Vote : x.ebit , rose.ebit
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Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #4 on: September 10, 2014, 05:11:11 AM »

Offline luckybit

Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #5 on: September 10, 2014, 01:26:43 PM »
When attempting to value a company one of the primary metrics that can be used is the earnings per share and the resulting P/E ratio.   You can view BitShares systems as companies that earn revenue from transaction fees and have expenses paid to people providing resources to the company.

I have put together a basic chart that shows the earnings BTSX would see at various transaction rates and trading volumes and then assumes an industry average 20 P/E ratio to derive an expected market cap valuation for the network.


Based upon these numbers the valuation of BitShares X with 1 transaction per second and $500K volume per day on the internal exchange is $62 million dollars.   However, if the internal exchange volume reaches similar levels to the external exchanges today, then the expected transaction rate would yield a valuation of $300 million dollars.    Once the exchange volume hits $10 million per day, the resulting transaction volume of 10 transactions per second the valuation would be about $700 million dollars.   

These valuations are based entirely on P/E ratios which are clearly not sufficient for valuing a crypto-currency.   Bitcoin for example has huge negative earnings, a transaction rate of less than 5 TPS and a valuation over $5 billion.     Using Bitcoin as a metric we could claim that a network is worth about $1 billion per TPS.    The vast majority of Bitcoin transaction volume occurs on exchanges, with BTSX many of the on-exchange trades will move onto the protocol itself and thus BTSX should have on-network transaction volumes equal to Bitcoin in a much shorter period of time.


The assumed P/E ratio of 20 implies a 5% ROI; however, most banks these days give depositors less than 1% ROI.   If BTSX is able to maintain its peg by backing bitUSD with BTSX and can share the transaction fees with bitUSD holders, then the demand for bitUSD will be enormous.   Due to the collateral system that requires effectively 3x the value of all bitUSD deposits to be held as collateral in BTSX, we can estimate the value of BTSX to be about 3x the demand for USD deposits at 5% ROI.   Considering the vast sums of money currently tied up in low-yield treasuries, savings accounts, etc the demand for bitUSD will be enormous. 

Of course, the more bitUSD that is created and “held” without corresponding transaction volume, the lower the ROI will become until supply equals demand. 

All of this is to say that the fundamentals on BTSX are very strong when analyzed like a traditional business and even stronger when compared to other crypto-currency systems on the market.

It all depends on time to market and other difficult to predict factors. If Bitshares X can market BitUSD effectively so people know about it and tell their friends then the opportunity for 5% yield could perhaps go viral. How do you engineer taking BitUSD viral?

You also have many competitors who will copy or try to copy BitUSD so it's a matter of quickly rolling out the features while also always continuosly adding new features. It is likely that the competitors will achieve feature parity in a short amount of time which means any particular set of features which look like they would bring in enormous demand today might not be as novel in a few months.

So for September 2014 BitUSD is quite novel and BitUSD with 5% is even more novel. The question is will the Bitshares platform win the innovation arms race? I see it as an innovation arms race and I tend to invest in the companies which have a 6 month lead in that arms race. If Bitshares can maintain their innovation lead then there will always be new investors who will want to invest in the most innovative technology.

There will be forks, clones, and other communities which attempt to copy the innovations from Bitshares and what matters is the rate at which team Bitshares pushes out new innovations. This way people who just copy and paste cannot keep up because the newest ideas will always come from the main chain.

tl;dr

Make Bitshares X as contagious and sticky as you can.
« Last Edit: September 10, 2014, 01:28:45 PM by luckybit »
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Offline Method-X

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Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #6 on: September 10, 2014, 08:53:27 PM »
The marketing team needs to show up, because from this point on it's all marketing.

Offline bytemaster

Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #7 on: September 10, 2014, 09:10:23 PM »
The marketing team needs to show up, because from this point on it's all marketing.

They are just about ready... we still don't have a stable / bug free client but we are almost there.
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline Riverhead

Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #8 on: September 10, 2014, 09:11:53 PM »
5AM in China and the price is starting to climb...go bitCNY!!!


This is a pretty sweet analysis. I think we're going to see a snowball effect.


« Last Edit: September 10, 2014, 09:13:49 PM by Riverhead »

Offline tonyk

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Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #9 on: September 10, 2014, 09:19:23 PM »
The marketing team needs to show up, because from this point on it's all marketing.

Brian has not posted recently... In my mind that means he is hard at work. I am eagerly waiting. Something big must be coming up.
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline yellowecho

Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #10 on: September 10, 2014, 09:21:46 PM »
The marketing team needs to show up, because from this point on it's all marketing.

They are just about ready... we still don't have a stable / bug free client but we are almost there.

Will the new client that cass is working on be available prior to the marketing push?
696c6f766562726f776e696573

Offline Bitshark

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Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #11 on: September 10, 2014, 10:21:41 PM »
is there an animated video in the works aimed at explaining bitassets? similar to - https://www.youtube.com/watch?v=XaY_KIsouTY ..

Offline Riverhead

Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #12 on: September 10, 2014, 10:24:41 PM »
The marketing team needs to show up, because from this point on it's all marketing.

Brian has not posted recently... In my mind that means he is hard at work. I am eagerly waiting. Something big must be coming up.


Agreed.  +5%

Offline liondani

Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #13 on: September 10, 2014, 10:38:57 PM »
The marketing team needs to show up, because from this point on it's all marketing.

 +5%
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BTSX Valuation based upon standard P/E ratio of 20.
« Reply #14 on: September 10, 2014, 10:56:37 PM »
I had a friend read BM's op, this is what he sent back:

"This guys argument is really poor. To use a P/E ratio you have to use it for all similar companies (for Apple you would use the tech industry average). The only benchmark you have for bitshares is bit coin which has negative earnings and is extremely overvalued. He brings up return on investment (roi) but that's going to be way higher because it's an unsecured virtual currency so accounting for that would drive his valuation way down. He also mentions that bitx is securitized by bitusd-this is a red flag. Who has conidence in securitizing with something equally as unsecuritized"

If anyone has any response for him, I will pass along

Sent from my iPhone using Tapatalk
« Last Edit: September 10, 2014, 10:59:27 PM by bitbro »

 

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