今後のイベント 2018年10月4日にNYCで開かれるNYゲーム・カンファレンスで、WAXのチームと会ってみませんか。

WAX ON: How To Successfully Value Crypto Tokens

1月 8, 2020
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Video Transcript:

How are tokens valued? Do we value them the same way we value stocks?

Now the first thing you are going to say is absolutely not. Stocks are valued based on discounted cash flows. How much revenue they generate, how much profit they make and those revenues. That is what matters when it comes to valuing the stock but I can tell you that's not really true. Amazon did not make a profit for almost 20 years. Zero, and guess what? It was valued more than zero.

Now, tokens don’t have cash flows with the exceptions of some DeFi applications, but there are other metrics we can track things like blockchain usage, the transaction count, the operation count. The thing is if you look at blocktivity.info, which tracks operations and for WAX, transactions, you will see that the top five blockchains as measured by operations are not the top five market cap tokens.

What about other metrics? How about the value of the community? No, not really. If you look at the biggest Telegram communities, you will see that some highly valued tokens have relatively high numbers of Telegram members but it is not consistent across the board. What about a metric that is near and dear to my heart? The amount of effort that a blockchain team puts into software development. Well, to debunk that one all you have to do is look at litecoin. Essentially no new development in over a year but it's still a top 10 token by market cap. Thing is we all want to believe that metrics and effort and even cash flows correspond to token prices and stock prices but they don't, at least not directly and rarely in the short term.

So now you are thinking if stocks are not valued based on cash flows and tokens are not valued based on usage metrics, then how are these things valued? Well there is one thing that matters more than anything else does when it comes to token and stock prices - and that’s the outlook. What do people expect to happen in the future, and how has their outlook changed? You will know when people's outlook changes. These other things, the metrics, whether they be revenues, transactions, product development work, they matter but they are actually insignificant in the short term compared to people's outlook. By the way, outlook has a name when it comes to stocks it is called ‘The Multiple.’ The multiple is a number you multiply the revenues of the company by or the profit by to figure out the value of the company or its market cap. So let’s say your company has 10 million in annual revenues, your stock trades at a 10x revenue multiple then your company is worth 10 million times ten, a hundred million dollars. It has a 100 million dollar market cap. Now tokens do not have multiples yet because they do not have revenues or profits, but people do have an outlook, good or bad, about the tokens they hold.

Let us examine what happens when there has been a change in the outlook for a token and for that, I would like to look at Ethereum. So in January 2018, Ether was priced at $1300. Today it is worth $150. That's a 90% drop. The market cap of Ethereum has gone from $130 billion in January 2018 to 16 billion dollars today at the end of 2019. Wow. What has been going on with Ethereum’s metrics during that time? Well since January 2018, about 2 years ago, Ethereum network has gone through a ton of software development. It’s had the Constantinople hard fork, the St. Petersburg hard fork, the Istanbul fork and now Ethereum 2.0 of the beacon chain which is shifting Ethereum from a proof of work to proof of stake chain. These are all positive developments. How about Ethereum accounts? While there were 18 million accounts or addresses in January 2018, there are over 80 million today and at the end of 2019. dApps, that number is way up. There about 800 dApps in January 2018, Ethereum now has about 2800 dApps two years later. Transactions, those have declined. They have gone from about a million a day in January 2018 to about 750,000 a day here in December 2019. It is a drop but not catastrophic. The bottom line is Ethereum is much better, more robust, a better software platform than it was two years ago. DeFi by the was not even a factor then. Now, Ethereum is the DeFi leader but it has dropped 90% in value and that makes no sense right? You might be thinking well this must be a phenomenon of a blockchain in crypto. This would not happen with well-run stock market right. Well actually, it does happen with stocks, in fact, we see this phenomenon time and time again in the world of publicly traded stocks.

Let us look at the second most valuable company in the world in the year 2000. Its market cap was $550 billion. I am talking about Cisco. The only company in the world worth more than Cisco at the time was Microsoft. What did Cisco look like in the year 2000? Well, it had $21 billion of revenue; it had $3 billion dollars in net income and with a market cap of $550 billion, Cisco was trading at 26x its annual revenue. 26 times revenue multiple. It was trading at 184 times its net income; a 184 net income multiple. Crazy right? That crazy requires by the way crazy future growth.

What happened to Cisco in the past 19 years? Cisco's revenues 19 years later today is $50 billion, two times higher than it was in the year 2000. Cisco's net income today is $12 billion that is four times higher than it was in the year 2000. What is Cisco's market cap today 19 years later after all that growth? It is $190 billion. You are thinking what? That is right. Cisco has lost 60 percent of its value when everything it has done has gone up. How can Cisco have lost $350 billion of market cap after it has more than doubled its revenues and quadrupled its net income? Well because people were expecting something better. The financial world cares about growth. They thought Cisco was going to continue to grow at ridiculous rates pretty much forever. And then, that rosy outlook changed and the financial world decided that for the more robust growth that Cisco was going to deliver going forward, a $190 billion market cap was appropriate. So that $550 billion that Cisco was worth in the year 2000 in retrospect, was considered a mistake.

So what does this mean for Ethereum? It means obviously it was overvalued back in 2017 and Ether back then was propped up by the explosion of ICO activity. People's outlook was crazy optimistic. When that ICO frenzy slowed people's outlook changed. Now Ether is still up from its original price of 25 cents but it is not getting back to that $1000 per Ether anytime soon. It is going to take a change in outlook. Another giant unexpected event to drive the price of Ether up from where it is here now. Frankly, I think that event could be DeFi but since we all know about DeFi, it is not unexpected. So Ethereum becoming the DeFi platform of choice is not enough to drive the price of Ether dramatically higher. It will take an explosion of DeFi applications far greater than anyone's current outlook to cause the price of ether to pop. Do not forget that point, for Ether to do really well again, something has to happen that is unexpected. Now I will be doing another video on this very simple but important point - to really do well in cryptos and stocks you have to have an outlook that no one else expects.

Until then if you like what you heard today hit subscribe below and I will see you next time.

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