Please Read The Disclaimer/ Disclosure At The Very End
I’ve been a long time (2014) supporter of XRP, and since then never really came across any other digital asset that raised my interest. Today I’d like to share my view on Bitrue’s BTR offering and explain why I ultimately decided to take a position in the project. I hope this turns out to be useful since quite a few XRP community members seem to be engaged (or intend to do so).
#1. What is BTR about?
BTR is a so called platform token. It has been issued by a crypto exchange named “Bitrue”. Initially an ERC-20 token, it’ll be moved onto the XRP ledger eventually. BTR is structured in a way which grants holders certain benefits (more on that later) on Bitrue’s platform. There will be a maximum of 1,000,000,000 tokens which are split across various share- and stakeholders. The public offering ended on 6th June 2019. Tokens are expected to be free to trade on 30th June.
#2. The Case For (Exchange) Platform Tokens
From those 2000+ digital assets in existence, it is hard to spot the ones that can thrive in a sustainable manner based on real utility. The good thing about platform tokens is that crypto exchanges (like Bitrue) already have a functioning business model. Introducing a platform token could be compared to adding oil to a fire (though the risk of thereby introducing a certain tribalism to the exchange sector prevails). The benefits attached to platform tokens are indeed “valuable” for holders. And this value is reflected in the tokens’ price discovery. The bigger the exchange, the higher the liquidity, the more valuable for market participants, the more demand for eg trading fee reductions or listing votes. This virtous cycle has also already been validated by platform tokens like BNB. A token that saw a rise from $0.15 to around $35 while Binance (the issuing exchange) grew spectacularly. And this happened during a bear market. It’s not overly surprising since history has shown that eg physical NYMEX exchange seats (that also come with trading fee reductions) were and still are in heavy demand. Su Zhu published interesting findings on this.
Platform tokens like BTR could prove to be quite an attractive long term play.
#3. The Case For Bitrue
To me, BTR stands out as today’s most promising platform token. I do not attribute my opinion primarily on the way it is structured but mostly on the issuing exchange. Bitrue is a first-mover exchange when it comes to XRP (base pairing).
XRP was designed to excel in payments. It’s the most scalable, cheapest-to-transact and fastest decentralized digital asset. Traders appreciate this and also benefit from its growing liquidity and widespread, global access. So far, Bitrue is offering 48 XRP pairs, establishing XRP as a base currency.
Bitrue’s bet on XRP could lead to massive rewards. The good thing is, it doesn’t seem to be an overly risky strategy. The XRP community is massive (if Twitter is any indicator) and tends to be a loyal and supportive crowd. This can be verified through the steady growth of the trading volumes (source is coinmarketcap):
Currently, Bitrue is #68 on Coinmarketcap’s exchange volume ranking. Keep in mind that Bitrue has gone live less than a year ago. And as we know from Binance (gone live in July 2017), things can take off quickly.
With all the hostility that the XRP community faced from established exchanges (eg Coinbase) and their reluctance to add XRP base pairs, I see a decent chance that Bitrue could evolve into the communities’ preferred exchange.
Also worth to mention is that Bitrue’s customer support enjoys an excellent standing (at least according to my Twitter feed). Maybe I was lucky, but when I signed up, I was fully KYC’ed within 3 hours — something I haven’t experienced before.
Going forward I see various potential growth triggers such as adding fiat pairs (this is being worked on) and the prospect of becoming an xRapid venue. Please keep in mind that Bitrue’s vision is to become a broad financial services platform (including lending products), not “only” an exchange. The implications on BTR could be very positive.
#4. The Case For BTR
By buying and holding BTR, Bitrue’s users enjoy trading fee discounts (40% in the first year down to 10% in the fourth year), a vote when it comes to listing new coins, higher interest rates for deposits (so called PowerPiggy, which are financed via Bitrue’s marketing budget to grow their customer base) and lower interest charges for their upcoming loan products. Bitrue also commits to spending 20% of its quarterly profits for buying back BTR (to then put those into an Eco-Fund). Based on the status quo, there should be a strong correlation between Bitrue’s success and BTR’s performance. There are 1BN BTR tokens in existence, and those have been distributed the following way:
35% Bitrue team/ employees, 15% Bitrue Backers/ Early Investors, 15% Public Offering, 25% Eco-Fund and 10% Market Expansion Fee.
I like that there’s a strong alignment of interest between Bitrue and BTR holders, since 500M tokens (with 1–2 years lock-up periods) have been allocated to management, employees and shareholders.
Also worth to mention is that Bitrue indicated further BTR usability and benefits.
#5. BTR Valuation
The BTR sale went really well. The last offering round was sold out in 3 minutes. Let’s take a look if it was indeed priced that generously:
Platform (exchange) tokens are usually valued by a MV/Vol multiple. MV is the market value of the tokens (total supply), and Vol mirrors the average 24h adjusted trading volume on that exchange.
According to Coinmarketcap, Bitrue’s adjusted 24h volume currently stands at $46.9M. If we multiply this with the current average MV/Vol multiple, we’d get to a (fully diluted) valuation of $178M for BTR (ie $0.178 per token), today. The tokens that the average MV/Vol calculation is based on (like BNB, HT, KCS etc) are structurally similar to BTR — that means they also offer features like trading fee discounts, quarterly buy-backs, IEO offerings etc.
These are my underlying calculations:
One could argue that BTR should be valued at a higher MV/ Vol multiple than 3.8 given its growth perspectives are considerably higher than the average. Nonetheless, considering that Bitrue’s offering was priced at $0.05 I would expect quite some upside pressure in the short term — and more significant repricings in case Bitrue’s trading volumes can keep their growth rates up. Other price triggers should be regulatory support, new BTR features, healthy buy-back volumes and IEO’s.
Keep in mind that MV/ Vol multiples fluctate over time. According to Picolo Research the average multiple (just a few weeks ago in May) was at 8.1 .
#6. BTR Risks
So this is a critical part: since 2014, there hasn’t been a single day where I had more fiat or XRP parked at exchanges than I had to. Exchanges can get hacked. Some exchanges even perform exit scams. In my view, we’re still in some sort of “infrastructure phase”, in which both solid foundations and trust is being built. I assess the following key risk factors to BTR:
- exchange hack
- scam related (either by management or employees)
- market related (crypto exchange markets are competitive)
- any kind of serious issues with XRP (since Bitrue is quite focused on it)
The problem is, at least 2 of the 4 identified risks would likely result in a sudden, total loss (so called “100% loss severity”). It’s really hard to work out probabilities for those kinds of risks, so I pick a (small) bet size which lets me sleep well. Given the upside potential, a smaller bet size can still lead to substantial rewards.
Overall, there’s not too much Bitrue can do about its risk factors right now. It’ll take time. What they need to do is show consistent trading volume growth, ongoing community interaction, regulatory work and -approvals. Agreeing to a voluntary oversight by a reputable regulatory body would build deeper trust quite quickly though.
#7. Investment Decision + Holding Strategy
Considering the previous analysis, BTR appears to me as a token with a very asymmetric risk/ reward profile. On a relative basis, the valuation appears to be highly attractive. Generally speaking, I feel like the time is right to deploy capital considering where we are in the overall (crypto) market cycle. Most Top 10 cryptos are still down 70–90% from their all-time-highs.
BTR will only be a fraction of my total XRP holdings, but still, I do see scenarios in which it can provide extraordinary returns. I really like Bitrue’s approach, how they take advantage of XRP - and how BTR could evolve into a utility based ecosystem of its own, without being overly dependent on speculative cycles.
It’s hard to predict the future, but I plan to take out parts of my initial investment at some point and hold the remainder for long term (> 5 years). Taking out (parts of) your initial investment makes a long term hold psychologically easier to handle (I realized that throughout my XRP journey).
#8. Disclaimer/ Disclosure
I do feel honoured to have >13,000 traders and investors following my personal Twitter account. With that comes a big responsibility. Please read carefully:
- With this document, I’m sharing the reasons why I (personally) have decided to support the BTR project — please do not consider this to be any kind of investment advice or encouragement. Economically, investing in BTR could turn out to be a great, or disastrous decision (see “BTR Valuation” and “BTR Risks”). The token could go to zero.
- At the time of writing, I own BTR tokens. I bought those. I might sell those any time without prior notice.
- I do not have any kind of contractual relationship with the Bitrue exchange. I also did not enjoy any rewards, rebates or preferential treatment.
- I have not been compensated, or rewarded in any way, by anyone, for publishing this document (ok, RabbitKickClub sent me 3 XRP).
- Data or information I referenced/ shared in this report might not be accurate or correct.