The Bull Case for $COSS. Why it is not unreasonable for $COSS to go up 39x
Edit: I have abandoned my COSS investment in favor of a company that has the same fee-split allocation structure but is moving much faster. You can read my article about KuCoin here.
TL;DR: COSS is an exchange where token holders get 50% fee split allocation. If COSS can generate trading volumes of even a mid-level exchange, the token price will increase by many multiples.
COSS (Crypto-One-Stop-Solution) is a crypto exchange and payment gateway. The team is trying to do a lot of things, but I just want to focus on the exchange business of COSS. Token holders of COSS are paid a 50% fee split allocation (weekly) of all fees generated on the exchange. The fees paid to the exchange come from both the buyer and seller paying 0.2% commission on trades*. Therefore token holders are re-allocated 0.2% of the daily trading volume (50% of 0.4% commission (0.2% paid by buyer + 0.2% paid by seller)).
What I like about COSS is that it is first and only exchange to offer a fee split allocation, and that doing so makes the coin easy to value using a traditional financial model.
Here’s a back of the envelope calculation of the fee split allocation at current prices/volumes.
COSS is still very young, (the COSS token only began trading on Sept 20th 2017), and currently is only the 80th most popular exchange by trading volume on coinmarketcap.com. This week COSS has approximately had $4mm of trading volume. If we don’t assume any growth this year, that works out to $208mm trading volume/year. Of that volume the token holders receive $416k (0.2%) among 93mm** token holders, which amounts to $0.004/year. The current value of COSS is $0.20/token, so this works out to a 2% annual fee split allocation***.
Remember this assumes no growth.
Now lets assume that COSS gets to the trading volumes of Binance, another very new exchange, which launched in August and 2 months later already has volumes of approximately $100mm/day. If COSS did the same, that would mean volumes of ~$36.5b volume/year, where $73mm (0.2%) would get distributed to 93mm tokens, which amounts to $0.78/year/token. At the current value of COSS at $0.20 that amounts to a ~400% fee split allocation/year.
Assuming that investors drive up the price of the COSS token until it yields a 10% yearly fee split allocation, that would value the COSS token at $7.80, a 39x return from where it currently trades.
So the obvious question is will COSS (the exchange) be able to bring in enough trading volume to make COSS (the token) truly valuable?
A look at the competitive landscape shows that COSS does have advantages. For one, the “major exchanges” (Bittrex, Poloniex, Kraken, etc), have almost completely stopped listing new tokens due to regulatory concerns. New tokens are therefore listed on “minor exchanges” (HitBTC, Cryptopia, Liqui, etc) and because COSS is not shy about listing new tokens, this is where it can really compete. COSS can also compete on customer support, which is so notoriously terrible at the major exchanges that tickets go unanswered for days or weeks, whereas COSS has customer support built right into its slack channel and questions are addressed immediately.
Another concern investors may have is can COSS compete with the upcoming decentralized exchange protocols (0x Project, Kyber Network, Airswap, etc)? This is a hard question to answer right now because we don’t know exactly how the decentralized exchanges will feel to the average user (will they be fast/slow? clunky/clean? easy/hard to use? cheap/expensive?). Certainly the first batch of decentralized exchanges (Bitshares, Waves, Etherdelta) did not topple the reigning centralized exchange champions. And a brief glance at RadarRelay (the first platform built on top of the 0x Protocol) shows that it is quite expensive, charging between 0.4%-0.75% commission/trade, more than twice that of COSS.
And if decentralized exchanges are truly the future, there’s no reason that COSS can’t re-code their exchange structure to become a decentralized exchange (Binance, the 12th most popular exchange by volume, has announced plans to eventually become a decentralized exchange).
One cannot emphasize enough the competitive advantage that COSS wields with its 50% fee split allocation. This will undoubtably give token holders incentive to trade on the exchange, which will bring volume, which will bring more users, which will bring more fees, which will increase demand for the COSS token, etc. Other platforms are not nearly this generous. Binance, for example, takes 20% of revenues and does a buyback and token burn quarterly until 1/2 of all outstanding tokens are burned. This buyback and burn scheme has seen the Binance token appreciate 13x from its initial listing price, but that is nowhere as satisfying as COSS’s 50% fee split allocation.
And let’s not forget we are still very early in the cryptocurrency bull market, and it is certainly a sound bet to say that total trading volumes for all cryptocurrencies will increase in the months and years ahead. The average 24 hour trading volume of all cryptocurrencies today is $4.5 billion, and when that number doubles or triples, all the exchanges will win, especially COSS token holders.
In summary, I think COSS is the best investment of October 2017, because of both the opportunity and that the token value is tied to something you can easily measure daily. The COSS token value is tied to the daily trading volume, something you can check in a click on coinmarketcap.com. You can look at the trading volume every single day, and if after a week or a month you feel like the growth is not to your liking, or the fee split allocation is too little, you can just sell your tokens. Compare that to a stock where you have to wait until end of of the quarter for an earnings report, or compare it to the 99% of other cryptos whose value is tied to some utility for a product that isn’t even in use yet, this certainly seems like a top 1% investment idea in terms of risk and reward.
* Traders who trade higher volume pay lower fees
** The fee split allocation is only shared with the tokens that are in COSS or in a configured MEW wallet, so in practice it is less than the outstanding 93mm tokens
*** COSS first weekly fee split allocation was distributed on 10/10/17, and it came out to 10% annualized (much higher than calculated above)
additional resources:
