DEXTF Newsletter #11
From TradFi to DeFi 1st video, Protocol Treasury executed buyback of 39,620 $DEXTF, and crypto assets valuation ep.2
Hey Everyone,
Welcome to this week's edition of the DEXTF Newsletter!
You can follow the community conversations on Discord, Telegram, Twitter, and Reddit!
DEXTF updates
A lot of interesting conversation and community feedback regarding DEXTF V2 have been shared on our Telegram channel, join our vibrant group and start shaping the future of asset management protocols.
Here is a breakdown of one of the hundreds of fund tokens (XTF.SSSWR1) launched on DEXTF by fund managers:
A snippet of an interview conducted by @NoronhaReuben with our CEO @NicolaLanteri:
For the full video check it out here, and don’t forget to hit the Subscribe button to view our upcoming explainers :
For those that want to dig into what’s DEXTF, this is a good start:
Also, DEXTF is hiring! If you think this is you, reach out to us. DMs are open.
Portfolio Metrics
[As of 8th Jul 2021].
Please refer to the DEXTF website for the latest APRs:
DEXTF/ETH is offering 77% APR
XTF/DEXTF is offering 99% APR
You can also earn $DEXTF by providing liquidity on Uniswap (29.6K tokens daily) or investing in any of the XTF funds (12K tokens daily)
Current TVL is US$ 2.6M (refer to DeFi Pulse)
You can invest by buying on Uniswap or on the DEXTF app
Here’s a quick guide on how to buy
Protocol Revenue
DEXTF has earned cumulatively US$ 37K in revenue since the Treasury started its asset allocation strategies. This has resulted in an additional buyback of 39,620 $DEXTF executed this past week.
To date, the cumulative amount of $DEXTF bought back by the Treasury is 110,003 $DEXTF.
Concept of the Week
⚖️ Crypto assets valuation pt. 2
In our last newsletter, we explored the concept of interest rate, which can be simply summarised as the cost of time.
Through rates, you can derive the present value or future value of your investment.
Each investor can make a careful assumption of a discount rate to bring future value to the present.
Therefore, depending on the rate, the PV could be higher or lower than market valuations, notwithstanding future value which can very well be higher than now.
But how much is your investment really worth when you're considering utility tokens with potential cash flows?
Should you be looking at the individual token or should you price in the network effects? How can we calculate the future value when the market is still in price discovery mode?
Valuation methods are understood as conventions that market participants have a consensus on, and as such are subject to self-fulfilling or reflexivity bias.
Here we attempt to give a simplified categorization of valuation methods. In this section we will go over the 1st category:
1.Based on the equation of exchange identity MV = PQ (quantitative)
2.Based on network parameters (quantitative)
3.Based on the addressable market, potential (qualitative)
4.Based on trading ratios (quantitative).
This write-up will delve into the QTM, or better known as Quantity Theory of Money, which is arguably the most popularized out there.
MV = PQ
where
M = digital asset supply size at a specific time (not in USD)
V= velocity of token (total transaction volume/average network value) defined as the average # of time the token changes hands by using the project's network
P = Average price of token for 1 unit of project output
Q =quantity of token
Since Chris Burniske's piece on "Cryptoasset Valuation" much has changed, particularly around cash flows from utility tokens (or governance tokens). Tokens have become what Wechat is in the mobile apps space, an all-inclusive vehicle that enables the holder to vote, delegate, accrue fees and access crypto services on Web3.
Rearranging the equation we derive that:
P= (M*V)/Q
where we solve for P which is the price of the token given Q (quantity of tokens), M (project total output) and V (velocity of tokens).
A second way of understanding this is to solve for M, or the quantity of tokens to be supplied to support the project given P, Q and V:
M= (P*Q)/V
Let's not forget about the discounting rate, which is used to convert a future value to today. This helps to understand whether an asset is generally overvalued or undervalued.
The discount rate is the rate of return that investors want to see yearly until the future value is realized.
PV = FV / (1+discounting rate)
Generally, crypto is seen as fraught with risk, from smart contract risk to legal risk to rugpull risk. Pseudonymous development teams have both delivered top-notch quality protocols as well as engineered the most sophisticated insider jobs. This complicates the risk for a crypto investor.
The discounting rate can be north of 50% or more per year, which shouldn't surprise as ROI for stablecoins are still at times > ~12%.
Semper Fortis
DEXTF Team