Finamatrix (founded since 2006) is a leader in Risk-Tech in financial markets with proprietary Machine-Learning technologies that provide an edge in FX hedging to increase purchasing power. Finamatrix was voted Top Multi-Strategy Fund and Best A.I. Tech for Hedge Funds.
Finamatrix Crypto-Valuation Team comprises professional valuers, Economics Professors and Chair Professor in FinTech and Big Data Research. Finamatrix utilizes unbiased and objective A.I. methods (risk-cybernetics)in cryptocurrency valuation for portfolio investments.
Disclaimer: This article should not be taken as investment advice. There is no single metric that can explain all token valuations. Valuation methods are appropriate only when the technique is designed for the particular token’s features and serve as a guide.
The world is undergoing a revolution in value transfer with the advent of Blockchain. Finamatrix’s valuation serves as the current “best-fit” method to the value of FiX cryptocurrency. Our method adjusts valuation approaches, parameters, and weights with time and best practices.
As with all investments, there exist various methods of valuation to determine “fair value”. The most appropriate method depends on the unique characteristics, availability of data, stage of development, profit potential, etc.
FiX token is a Hybrid utility coin which features a Stable component(relative to a basket) backed by fundamentals, and also a Growth component, driven by leading A.I. technologies. FiX is utility derived from currency risks hedging by increasing purchasing power relative to major currencies.
The recent valuation method published in June 2019 proposed by Yunlin Liu calculates Price-to-Utility Ratio by estimating Token Utility is an alternative method but not suitable for FiX since the dilution rate (measures the annual growth rate of the token supply) is 0% for FiX which translates to a potentially infinite utility value, and thus an undefined price of FiX. In Liu’s paper, he proposes:
token utility=(token velocity*staking ratio)/dilution rate
Token velocity measures the percentage of tokens transacted over the past 24 hours relative to the token supply. A large token velocity signifies an increasing usage of and demand for the token. It leads to a high token utility. However, each token is subject to idiosyncratic risk and new projects have limited transaction volume. To solve this, we suggest using the total market token velocity as a better industry proxy to token demand, adjusted by the particular token’s Crypto Public Float % (CPF%) which is the Circulating Supply to Total Supply ratio.
The staking ratio is defined as the ratio of staked tokens (inactive tokens for more than a year or n periods) with respect to the total token supply. A high staking ratio suggests that more users are placing long-term faith in the blockchain project.
For FiX, ‘staked’ and inactive tokens are defined as tokens that have been locked up till defined milestones have been achieved and this comprises 50% or more of the total supply.
Token velocity represents the utility of the token in its role as a medium of exchange that is demanded by daily active users (DAU). The staking ratio represents the utility of the token as a store of value, demanded by long-term hodlers (LTH).
In the case of Proof-of-Stake (PoS) blockchain projects, a fraction of tokens is staked in the system. For Proof-of-Work (PoW) projects, “staked tokens” are tokens that have been kept in inactive accounts for more than one year.
Consequently, FiX is pre-mined and transactions are validated on the Waves Blockchain with Waves token Leased-PoS. Hence, we estimate the utility value of FiX with a different approach as explained below.
Value-Driven Valuation Approach
Firstly, the demand for FiX stems from the demand to receive value-enhancing A.I. services by Finamatrix. Clients have to own FiX to begin and FiX is the payment tool between clients and the company. It can be perceived that clients pay a membership fee and receive FiX. Evidenced with the increasing client base which has been increasing FiX token demand, coupled with a limited token supply of 300M, FiX equilibrium price has been increasing steadily.
As a consequence of the above, it is proposed to use the base cases of Metcalfe’s Law and Theory of Value in Economics, to derive a range of values for FiX, as a guide. See:
Therefore, the indicative price (P*) of FiX is theoretically derived from the utility value which is a function of both Network Value (Users) plus Intrinsic Value (Token Demand, Corporate Size and Fund Performance).
EXPLANATION & JUSTIFICATION OF THE RISK-CYBERNETICS (ITERATIVE PROCESS) CRYPTO-VALUATION MODEL FOR FiX:
Let’s breakdown the following formula:
Where P* is the indicative price of FiX, which is equal to a function (f) of both the intrinsic (or fundamental) value and network value. The company’s revenue-generating business represents the intrinsic value, while the number of users of the utility token represents the network value.
The first intrinsic value under consideration, Corporate Size, is proxied by the amount of Assets Under Management (AUM). This is a transparent way of determining corporate size. The current AUM of the company is circa US$30M and growing. This data is made available in major fund databases such as MorningStar, Preqin, Allocator, Eurekahedge, etc. As AUM increases, more revenues are expected and hence the price of FiX will be higher to reflect these changes.
Where RGM represents the Relative-Growth Multiplier which is calculated as (1+RR/30%). AUM is adjusted by RGM to account for changes due to Fund Performance. The growth rate of FiX prices is explained partially by the Rate of Return (RR) of the ‘Finamatrix A.I. Fund’, where the target annualized net return is 30%. A higher return would mean a larger dollar value to support a higher FiX price. RR/30% (and not just RR) is used as a form of probability ratio of achieving the target returns, and this probability is added to 100% then multiplied with the AUM to account for growth expectations in AUM. If RR becomes negative, clients withdraw funds and the formula accounts for this shrinking AUM. Conversely, if RR is positive but less than 30%, 30% or more than 30%, more clients will invest in the fund and the AUM will expand. We have kept the formula in linear rate for simplicity. RR data can be extracted from our historical returns in:
Where CPF% is the Crypto Public Float (%) which is Circulating Supply (CS) per Total Supply (TS) or CS/TS. The larger the Circulating Supply relative to Total Supply, the greater the Token Demand of FiX, and thus the price of FIX will increase. Data retrieved from https://coinranking.com/coin/finamatrix-fix) for CS and TS data. FIX total supply is set at 300M tokens (or less subject to consensus) and can also be verified on Waves Blockchain in http://dev.pywaves.org/assets/fix.
Where CMM represents the Crypto Market Multiplier for the entire cryptocurrency market and accounts for the total market potential value. This is calculated as TV/TMC where TV is the Total Daily Cryptocurrency Trading Volume (TV) per Total Cryptocurrency Market Capitalization(TMC). This data is retrieved from https://coinmarketcap.com/
Where NV is the FiX Network Base-Value, which is estimated by N² where N is the number of addresses that own FiX. As N becomes larger, the value of FiX increases. This data is also retrieved from http://dev.pywaves.org/assets/fix
Note: The summation of both estimates of intrinsic value and network value are divided by the total supply of tokens so as to derive a value per token.
Where CMA is the Crypto-Mulitple Adjuster of 10, 20 or 30, so as to provide a range of price estimates. We determine a crypto industry-specific multiple proxied by the global stock markets’ average Price-to-Book ratio of circa 20. Data retrieved from https://csimarket.com/Industry/Industry_Valuation.php The book value of FiX can be viewed as derived from the number of potential clients and potential AUM of the company, that support the market cap of the token.
Thus, to support a $1 billion valuation, with each user holding on to $10,000 worth of FiX, we will need 100,000 users, which is highly realistic. Regarding our potential AUM, the investment strategies of the fund are able to cope with large AUM that invests in the trillion-dollar FX and global equity markets. Therefore supporting a $1 billion valuation or above.
Below are the estimates after extracting data from the above links as described above and inputting them into the formula.
RISK-CYBERNETICS CRYPTO-VALUATION (CURRENT):
P*=($3.16, $6.33, $9.49)
FiX token value ranges approximately from $3 to $9 with an average market capitalization of $1.8B.
JUSTIFICATION: The market cap can be supported by 14,000 users with about $128K worth of FiX each OR 180,000 users with $10,000 worth of FiX each.
RISK-CYBERNETICS CRYPTO-VALUATION (TARGET):
The indicative FiX token prices (P), derived using the following formula, for the next 3 years, after achieving milestones:
P*=($68, $135, $203)
FiX token target value ranges from $68 to $203 with an average market capitalization of $38B.
JUSTIFICATION: The market cap can be supported by 100K users with $380K worth of FiX each OR 380K users with $100,000 worth of FiX each.
FiX TOKEN TRADING
Convenient automated trading tools will be introduced for easy trading of FiX and FiX will be listed in additional exchanges for greater access by the cryptocurrency community.
Trading is easy on Waves-DEX. Download: https://wavesplatform.com/products-wallet
MILESTONES & TARGETS
- Finamatrix has appointed a Monetary Authority of Singapore (MAS) regulated Capital Markets Services (CMS) licensed fund management company backed by a multi-billion dollar industrial group, to set up the “PAAM Finamatrix A.I. Fund” with Finamatrix as A.I. advisor.
- Finamatrix has signed a key distributor agreement with AM International Pte Ltd, a Singapore-based advisory company with extensive global networks, providing accredited investors with a comprehensive Singapore investment platform.
- Finamatrix is in the process of growing AUM to US$1 billion.
- In exploration with reputable exchanges for FiX listing to reach greater market access.
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