Author Topic: BTSX Valuation based upon standard P/E ratio of 20.  (Read 7772 times)

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Offline Riverhead

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...

Offline oldman

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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.

BitShares is currently trading at over 5x its value of just one month ago...things move fast when something truly revolutionary is afoot. I personally believe we'll all be caught off guard at how quickly things explode if BitYield works as planned and an impressive trading software suite rolls out. The potential here is absolutely monumentally enormous...can't wait.  8)

The velocity of crypto-capital is unprecedented.

Moving value from fiat -> BTC has been painfully slow, and still is for the majority of folks.

But even with a severe on-ramp handicap the increase in BTC market cap over the last five years has been breathtaking.

Moving value from BTC -> BTSX takes minutes...

I don't think we can underestimate the velocity with which value can move into BTSX.

Hell, it is possible to hit a cap of $1bn in few months if a substantial marketing campaign is rolled out.

At the very least, why not hold bitBTC and earn some yield?

BTC holders don't have desert for the BTSX camp... they can maintain their portfolio allocations and improve ROI.

Once there is depth and solid peg I know I'll be moving some value from BTC to bitBTC.

Just need to get the platform stabilized, a reasonable feature set in place and then get the word out.

The ride could be epic.

Offline santaclause102

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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.
This is all sound. The obvious assumption to make for the part that begins with "The assumed P/E ratio of 20 implies " is: Savers / investors who buy bitUSD for the ~ 5% return are confident enough that the risk that the market peg fails is so small that this risk does not have any considerable effect on the whole valuation of BitUSD and therefore BTSX.*
The Market peg / BitAssets will have to prove to be reliable under all conditions empirically over time and theoretically (theoretically insofar as a consensus among credible observers has to establish about the validity of conclusions and the validity of assumptions, which will increase trust in the reliability of the peg; with this I am not saying that BitAssets dont work if individuals people trust do not say that it works. But it is a fact that the masses rely on the judgement of those they trust).

I think it is advisable to make this explicit. People will put that forward as a critique if it is not stated in the first place.

* You could make the analogy here to the "no one will violate any rules if the chances to be caught are 100%". Similarly, everyone will go into BitUSD if returns above what I get at the bank are guaranteed no matter what. I am not trying to say fix it at 5%! It more refers to what I said above. Like any analogy it can only illustrate things and not prove anything...
« Last Edit: September 12, 2014, 03:17:16 pm by delulo »

Offline nomoreheroes7

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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.

BitShares is currently trading at over 5x its value of just one month ago...things move fast when something truly revolutionary is afoot. I personally believe we'll all be caught off guard at how quickly things explode if BitYield works as planned and an impressive trading software suite rolls out. The potential here is absolutely monumentally enormous...can't wait.  8)

Offline Method-X

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... 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.

Offline oldman

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>$1USD/BTSX in < 1 year.

Based on absolutely nothing.

Offline G1ng3rBr34dM4n

... 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

Offline Method-X

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... 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?

Offline Chuckone

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... 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...

Offline Method-X

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Offline xeroc

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... I expect to see at least 0.30 per share a year from now.
0.30 denoted in BTC, USD, EUR, or CNY?

Offline Method-X

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Anyone getting in on BTSX now is still very early to the game, in my opinion. I expect to see at least 0.30 per share a year from now.

Offline Chuckone

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Good for you all if your stake in BTSX is large enough to be rich if it catches on  8)


I certainly won't get rich but might be able to switch to part time work, or a job that is less demanding of my time. May even be able to make a go of working in crypto.

On my part since I lost almost all my small BTC investment in the MtGox demise (except for 1 BTC, invested totally in PTS/AGS, after the feb. 28th snapshot, and then in BTSX just after the DNS/Vote snapshot), I won't get anywhere near being able to do anything special with my gains lol.

Not too late to invest more in promising DACs though! Too late for the "get in early, get rich", but I don't mind. I didn't expect to stop working before I'm 70 (not yet 30, so I've got a long way to go haha). And I have a good job, so no financial worries anyway!

I see Bitshares as a very interesting experiment I like to follow and participate in, so if I can make a few bucks in the process that's good, but I'm not expecting to get rich.

I like to see early investors getting wealthy though, that's quite inspiring. I'm not envious (not my type), and it's fun to see that hard working people and early believers get their dues.

Cheers!

Offline Riverhead

Good for you all if your stake in BTSX is large enough to be rich if it catches on  8)


I certainly won't get rich but might be able to switch to part time work, or a job that is less demanding of my time. May even be able to make a go of working in crypto.

Offline voldemort628

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How much do u think is "big enough"? :))