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XRP Crypto Asset Valuation Model - Addition of New Addressable Markets


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https://drive.google.com/drive/u/1/folders/1SB_9CCcuu9N70Xr-9Uqi16oN-X9DwPna

XRP Community, I have gone back and revised the XRP Crypto Asset Valuation Model that I posted a few weeks ago, in continuation with trying to keep the XRP valuation model as up to date as possible. The changes made to this valuation model include formatting changes, changes around velocity assumptions (velocity went up), and the addition of two new addressable markets.

The most recent model is titled: "Rebuilt Crypto Base Model (XRP Economy) (2_10_2018)" - today's date

The new markets are:

1) $27 trillion dollars of dormant capital that sit in Nostro/Vostro accounts ($27T coming from Brad Garlinghouse's statements) going towards the total $150T in annual cross border payments. I assumed that not all of the $27T would go towards the $150T in existing global cross border payment volume but that a % of the $27T would in fact be reallocated and used in cross border payments. My view was that since this money would be getting freed up it would have to be put to work somewhere, which is why I assumed a % of the $27T and not the entire $27T as the addressable market size.

2) The addition of the derivatives settlement market, which is estimated to be $554T according to this source: http://money.visualcapitalist.com/worlds-money-markets-one-visualization-2017/

It makes sense to me that Ripple would target the derivatives settlement market to have XRP serve as a bridge asset between derivatives and fiat currency settlement (i.e. XRP would act as the settlement layer and then get converted to fiat).

Additional Comments:

I urge users to please download the excel file to their personal computers so that they may enjoy and utilize the full functionality of the excel model (since certain model features don't work when looking at the model in google drive sheets).

Per usual, the link to the original model created by Chris Burniske is below - the article explains how the models work and has a link where you can download the original file storage model used by Chris in his medium article:

https://medium.com/@cburniske/cryptoasset-valuations-ac83479ffca7

Please let me know if you guys have any comments or see any errors in the model. If you do notice errors please let me know so that I can quickly make the necessary changes. I will continue to work on this and will upload updated versions of the model as they are completed. Long XRP 

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6 minutes ago, xrp_moonjet said:

why don't you post your price forecast as a image..makes it easy for everyone to see rather than sharing your google drive link..

The price forecast will vary based on assumptions. My assumptions around velocity, % of hodler's holding what % of total supply, supply schedule, etc. will all have an effect on the price. For this reason I think it's better for others to take a look at the model, understand what assumptions are driving price, and make their own assumptions. Additionally, I am open to discussing the assumptions used - rather than thinking that I know what's a realistic assumption to use.

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5 minutes ago, Mpolnet said:

The price forecast will vary based on assumptions. My assumptions around velocity, % of hodler's holding what % of total supply, supply schedule, etc. will all have an effect on the price. For this reason I think it's better for others to take a look at the model, understand what assumptions are driving price, and make their own assumptions. Additionally, I am open to discussing the assumptions used - rather than thinking that I know what's a realistic assumption to use.

Yeah.. For ppl who are interested in taking a deep dive its helpful.. But nowadays I am scared to link any link on internet..  Sorry bro. don't mistake..

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Just now, xrp_moonjet said:

But nowadays I am scared to link any link on internet..  Sorry bro. don't mistake..

Sorry, I'm not 100% sure I understand what you mean here? Could you elaborate and maybe I could address your concern?

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On 09/02/2018 at 10:09 PM, Mpolnet said:

https://drive.google.com/drive/u/1/folders/1SB_9CCcuu9N70Xr-9Uqi16oN-X9DwPna

XRP Community, I have gone back and revised the XRP Crypto Asset Valuation Model that I posted a few weeks ago, in continuation with trying to keep the XRP valuation model as up to date as possible. The changes made to this valuation model include formatting changes, changes around velocity assumptions (velocity went up), and the addition of two new addressable markets.

The most recent model is titled: "Rebuilt Crypto Base Model (XRP Economy) (2_10_2018)" - today's date

The new markets are:

1) $27 trillion dollars of dormant capital that sit in Nostro/Vostro accounts ($27T coming from Brad Garlinghouse's statements) going towards the total $150T in annual cross border payments. I assumed that not all of the $27T would go towards the $150T in existing global cross border payment volume but that a % of the $27T would in fact be reallocated and used in cross border payments. My view was that since this money would be getting freed up it would have to be put to work somewhere, which is why I assumed a % of the $27T and not the entire $27T as the addressable market size.

2) The addition of the derivatives settlement market, which is estimated to be $554T according to this source: http://money.visualcapitalist.com/worlds-money-markets-one-visualization-2017/

It makes sense to me that Ripple would target the derivatives settlement market to have XRP serve as a bridge asset between derivatives and fiat currency settlement (i.e. XRP would act as the settlement layer and then get converted to fiat).

Additional Comments:

I urge users to please download the excel file to their personal computers so that they may enjoy and utilize the full functionality of the excel model (since certain model features don't work when looking at the model in google drive sheets).

Per usual, the link to the original model created by Chris Burniske is below - the article explains how the models work and has a link where you can download the original file storage model used by Chris in his medium article:

https://medium.com/@cburniske/cryptoasset-valuations-ac83479ffca7

Please let me know if you guys have any comments or see any errors in the model. If you do notice errors please let me know so that I can quickly make the necessary changes. I will continue to work on this and will upload updated versions of the model as they are completed. Long XRP 

Thanks, it is pretty ellaborate, obviously you have put lots of effort behind. One question thought, am I right to assume that this model does not factor in any utility outside of those mentioned in the file - example of such would be utility by companies like Uber, Airbnb and alike? 

Thank you

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23 minutes ago, Insoniac said:

Thanks, it is pretty ellaborate, obviously you have put lots of effort behind. One question thought, am I right to assume that this model does not factor in any utility outside of those mentioned in the file - example of such would be utility by companies like Uber, Airbnb and alike? 

Thank you

Correct! The model currently doesn't include payments being processed by Uber, Airbnb, Apple, etc w/ XRP as the settlement layer asset. If your assumption is that those payments being processed by those companies are not included, then the model undervalues XRP (assuming all the assumptions are accurate).

Edit: I left this out since gathering data on the aggregate dollar amount of transactions being processed by all of these potential customers (in a given year) is an exhaustive exercise in it's own. And knowing the number of customers and which customers is not so clear right now. But if anybody knows where this data can be found or if anyone can provide this data I would be more than happy to add it to XRP's addressable markets and try to build some functionality features around it, in excel.

Alternatively, you as the user, could believe that the payments processed by those companies falls into the Global Cross Border Payments market. In which case, the model does account for those uses. 

Hope this was able to answer your question!

Edit: Another use case I have pondered is XRP replacing the SDR (Special Drawing Rights) currency, which is used by the IMF (I believe the aggregate value of the total SDR reserves are less than $1 trillion, which would constitute the total addressable market). The other use case I have been pondering is XRP making up a % of M0 or M1, and taking away market share from traditional currencies. I'm more than open to any input on potentially incorporating these markets for XRP's addressable use cases.

Edited by Mpolnet
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  • 1 year later...

The link below expands on the idea of using MV = PQ to value a digital asset. I have yet to put together any analysis utilizing the methodology in the link but figured it's worth sharing.

https://static1.squarespace.com/static/5a479ee3b7411c6102f75729/t/5cc4ad03f5a50f00010525e7/1556393220303/Value+Capture+and+Quantification_+Cryptocapital+vs+Cryptocommodities_Final.pdf

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16 minutes ago, Sir-Loin said:

The above link is the best thing posted in this forum in over a year... Easily!! Thanks alot and keep this thread updated. Finally somebody talking sense rather than hopium, fud and drivel

Happy to share with the community. While fundamental analysis is still new to the industry and being iterated and improved upon it's important to have a sense of how value can potentially accrue, even though utilizing this approach doesn't guarantee that prices will reach what is modeled. 

While I haven't had the time to run the initial analysis through the new methodology the paper indicates that utilizing the HashCIB approach yields a higher value than simply using MV = PQ. This can also be seen by downloading the model in the link below, where they compare the various methodologies (and their NPV's) in the downloadable excel model. The driving reason behind the higher net present value is due to how velocity is treated. Additionally, rather than taking a valuation per unit at one point in time and discounting it back to present value, the new approach looks to be aggregating the value over time and then discounting that to present day. 

https://medium.com/@HASHCIB/the-next-step-in-cryptoasset-valuation-34bade0386de

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On 2/9/2018 at 1:09 PM, Mpolnet said:

I urge users to please download the excel file to their personal computers so that they may enjoy and utilize the full functionality of the excel model (since certain model features don't work when looking at the model in google drive sheets).

Not gonna be able to download anything to my computer friend.  This is a community for crypto investors, I would hope that we're a bit more savvy than to install some random excel sheet on our computers.  Excel can use VBA (Visual Basic for Applications), which is powerful enough to do some damage, it can definitely scan a hard drive and send an email.  I'm sure there are online options for you if you really want people to look at your spreadsheet.

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