Author Topic: BTSX Valuation based upon standard P/E ratio of 20.  (Read 7279 times)

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Offline oldman

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Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #45 on: September 12, 2014, 04:15:37 pm »
So lets say we get a large portion of the BTC crowd in bitBTC. Wouldn't someone cashing out a very large stake upset the peg? If their bitBTC reaches a point they want to sell $5MM worth they'd still have convert it to BTC on the open market. I guess we're assuming that one or more of the following will come about:

1) The centralized exchanges support bitBTC so they can cash out 1/1 bitBTC/BTC
2) They can go from bitBTC->bitUSD->fiat directly
3) bitBTC->fiat Coinbase style.

Going from BTC->USD in large enough quantity would cause a price slump. Going from bitBTC->BTC in large enough quantity may give the market a heads up to start dumping some BTC...

Yes, agree with BM on liquidity providers.

However, my initial reaction is the majority of 'cashing out' will be from bitBTC to bitFiat or bitGLD/SLV.

I think most folks savy enough to make the BTC -> bitBTC transition are likely to keep the value in the crypto-space.

Those looking to convert large quantities of BTC into real fiat in the near term would not likely assume the extra risk of a bitBTC for the small ROI increase from the yield.

So a large movement of value out of the bitAsset economy is going to put pressure on the peg, but I'm not sure it is going to be a frequent thing as the platform matures.

Would be an interesting exercise to stress-test the bitUSD peg periodically as liquidity increases. Should be able to quantify the 'strength' of the peg rather nicely...
« Last Edit: September 12, 2014, 04:17:51 pm by OldMan »

Offline oldman

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Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #46 on: September 12, 2014, 04:20:36 pm »
... I expect to see at least 0.30 per share a year from now.
0.30 denoted in BTC, USD, EUR, or CNY?

USD

That's approximately 8 times the current value, and give BTSX a valuation of 600M$. That's kind of bullish, but not unseen in the crypto-world. Knowing the quality of the product/features offered and the quality of the devs supporting the whole project, nothing's impossible! It's all about appealing to the masses and deep pocketed investors...

Are you familiar with the bitcoin bubble cycles?

lol - my first reaction was 200-300x seems realistic.  500x+ is bullish

A 200x increase would put the BTSX market cap at $16,000,000,000 USD. I don't see that happening all in one bubble cycle. I'll be happy with a 5x increase over the next year or so.

Not out of the realm of possibility if BTC hits $60-600bn on the next bubble ($10-100k/BTC).

Offline tonyk

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Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #47 on: September 15, 2014, 07:06:31 am »
For me retirement (being rich) is when I can work without the need to get a paycheck.
While I do not really envision myself  doing nothing, I will much prefer to do something that keeps my brain busy, gives me some 'moral' satisfaction and that occupation does not need to necessarily bring  financial benefits on any short term bases (weekly/monthly/yearly).

I feel the same way, being rich to me is having enough "fuck-you" money to be able to decide for yourself what you'd like to do with your time, not have it imposed on you by the necessity of having a steady salary for paying down mortgage, food, etc.. I hope to "retire" before I'm fourty, but retirement in my case merely means quitting my dayjob to work for myself on things that I'm passionate about. Hint: Bitshares is one of those things :)

Post contents inspired by www.mrmoneymustache.com, check it out if you have time :)

Nice site! Still reading small chunks of it. Have been doing most of the basic stuff (opening blog post suggestions) already without being able too save more than 5-10% of my income. And that's on a good month ... those good months are, as once Mark Twain said, all months except... "July, September, March, December, August, October, April, January, November, February, May, June..."
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline starspirit

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Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #48 on: September 15, 2014, 11:42:38 pm »
I am a fan of the Bitshares platform, but lets keep our heads on.

First, there is no such thing as a "standard PE ratio". Valuation is much more complex than that, especially for a business in a highly dynamic area of innovation where leadership can shift quickly. 

Second, its way too early to talk pie-in-the-sky numbers when there are still very basic issues that need to be resolved, contrary to some other posts I've read claiming an early victory. At this point there is still no mechanism in place to ensure that BitAssets will remain close to their pegs. Last I looked the highest bid on USD was 11% below the feed price, for BTC 12% and for CNY 15% below. The current mechanism to generate yield on USD (being based on a transaction fee pool) could never ensure this pegging, and is effectively subsidised (I think unsustainably) by BTSX holders. Further, there remains very limited liquidity in these markets and high spreads, which makes them unattractive for traders and potential commercial users of USD. Yes, I know its all still early, and I don't want to be a wet rag. But let's keep our heads focused, continue working as a community to get this to work, prove it to the outside world and then the rewards will come, whatever they may be.

Offline liondani

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Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #49 on: September 15, 2014, 11:47:52 pm »
I am a fan of the Bitshares platform, but lets keep our heads on.

First, there is no such thing as a "standard PE ratio". Valuation is much more complex than that, especially for a business in a highly dynamic area of innovation where leadership can shift quickly. 

Second, its way too early to talk pie-in-the-sky numbers when there are still very basic issues that need to be resolved, contrary to some other posts I've read claiming an early victory. At this point there is still no mechanism in place to ensure that BitAssets will remain close to their pegs. Last I looked the highest bid on USD was 11% below the feed price, for BTC 12% and for CNY 15% below. The current mechanism to generate yield on USD (being based on a transaction fee pool) could never ensure this pegging, and is effectively subsidised (I think unsustainably) by BTSX holders. Further, there remains very limited liquidity in these markets and high spreads, which makes them unattractive for traders and potential commercial users of USD. Yes, I know its all still early, and I don't want to be a wet rag. But let's keep our heads focused, continue working as a community to get this to work, prove it to the outside world and then the rewards will come, whatever they may be.

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Offline James212

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Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #50 on: September 16, 2014, 12:50:29 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.

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.

Agreed.  What also matters is the rate of adoption.  This will depend on marketing, which should be rolling at full steam by the end of Sept at the latest(?), and the critically important positioning of the product in the eyes of the mass market.   
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Offline James212

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Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #51 on: September 16, 2014, 12:53:08 am »
is there an animated video in the works aimed at explaining bitassets? similar to - https://www.youtube.com/watch?v=XaY_KIsouTY ..

I hope they are working on a slicker more modern looking version!
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Offline Riverhead

Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #53 on: September 16, 2014, 03:59:42 am »
If Dilbert ever ventured into comp sci
« Last Edit: September 16, 2014, 04:05:45 am by Riverhead »

Offline jsidhu

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Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #54 on: September 16, 2014, 04:03:43 am »
Based on the premise in the OP would the value of BTSX really be 3*bitUSD + 3*bitEUR * 3*bitGLD issued etc etc ?
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Offline kisa

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Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #55 on: September 25, 2014, 09:03:57 am »
Based on the premise in the OP would the value of BTSX really be 3*bitUSD + 3*bitEUR * 3*bitGLD issued etc etc ?

If someone values BTSX at P/E of 20 means then annually generating 5% of BTSX market cap in trading fees,
which is 15% of bitAssets market cap!

At trading fee of, let' say 0,15% of transaction volume, means that we would need trading volume equal to 100xbitAssets market cap p.a. E.g. 100 times as actively traded as fiat/BTC nowdays... Sorry not learnt yet / not sure what trading fee assumption is more realistic...
« Last Edit: September 25, 2014, 09:07:49 am by kisa0145 »

Offline santaclause102

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Re: BTSX Valuation based upon standard P/E ratio of 20.
« Reply #56 on: September 27, 2014, 01:03:02 am »
Another way of evaluating a company is comparing it to other companies that more or less do a similar service. I picked visa http://finance.yahoo.com/q?s=V which has a market cap of $113bn. Leaving all practical and risk distribution considerations aside I would be about indifferent if I owned either all btsx or 1/100 of all Visa stock atm. That gives BTSX a valuation of $1.13bn. If BTSX found mainstream adoption and there would be no legal challenges I would rather own all BTSX than all Visa shares...Here is where I think most of the risk/challenges in the btsx investment lies (ordered by importance):
1) Legal challenges (BitUSd specific issues; AGS; DAC/delegates/DPOS specific issues)
...long nothing....
other things often discussed and worked on like competitors / complementary products, main stream adoption, market peg holding under all circumstances and mainstream having enough confidence in it.