Bitfinex's estimated revenue, and why I am selling my BFX tokens
Sold all my BFX at $0.40 and am fully cashed out of bitfinex, here's why.
Pseudo-Mathematics
Was doing some back of the envelope calculations. Taking the 24hr volume of their markets for the last few days (not the biggest sample I know) and the loans on their books. I came up with an annual revenue of ~$5,000,000.
Now this is revenue and not profit, a great revenue to profit ratio is considered anything above 25%, so let's assume bitfinex is super efficient and let's give it 30% ratio and a annual profit of $1,500,000.
Bitfinex have not released their liabilities but let's guess wildly anyway, they lost $70,000,000, let's say they had a massive rainy day stock pile of $10,000,000 (number pulled from my ass, but can't see real number being higher), leaving bitfinex owing $60,000,000.
Now the $1,500,000 number I came up is on current volume, let's say they win back customers, let's double their volume and give them $3,000,000 profit a year that puts them at paying off debt in 20 years.
It is not all doom and gloom for them though, they changed all debt from cryptocurrency to USD, so if btc and/or eth go up in price bitfinex's profits in USD will go up but there debt will not. I believe bitfinex are betting their company on crypto raising in value.
What's wrong with that? So am I! I realised the only chance I have of bfx raising to $1 is if btc/eth raise so why not cut out the middle man, the middle man that is on very shaky ground. As long as bitfinex's revenue remains high there is a good chance that they can keep the lawsuits and creditors at bay, but if cryptos start to tank the entire site may have to be liquidated.
Conclusion
Hold bfx
If cryptos rise, bfx rises
if cryptos fall, bfx falls and possible ceases to exist
Hold cryptos
If cryptos rise, cryptos rise
If cryptos fall, cryptos fall
Why take the risk with Bitfinex staying afloat? A 50% fall in btc/eth value could potentially break them and loss you 100% while a 100% increase would still only see them pay off creditors after 10 years (if we are generous).
Has BFX got value? Yes, but I can't see it's value being $0.40
I think you need to sharpen your conclusion, because it doesn't quite match what you laid out. You sold your BFX but you recommend a Hold?
If Bitfinex's annual revenue is just $5 million, they can never make their debt tokens whole (absent apprehending the hacker and getting the BTC back) and no buyer would find it worth taking on their customer liabilities that are also made up and perhaps not even legal. I am very bearish on BFX and think they are worth close to nothing (but not nothing). I have been wrong so far though!
ah yea that's confusing alright, all in all the article was rushed and not the best put together.
In the conclusion I was trying to say if you hold bfx it is the same as holding a basket of cryptos except with a much bigger risk to the bfx. So not recommending holding bfx. would be tempted to buy on bitmex at around $0.10 though.
I think bfx will make it back to $1 but only because I think btc and especially eth will increase in value over the next year.
Good article, to continue this multi article/site conversation I am going to post there
We know each other from Jam. I was bitcoinfreedom on there. I hope all is well with you.
Many assumptions are in your math above. First let me discuss the money owed to customers. Roughly 70 million tokens were issued with $1 being par with each token. Many of those shares will be given the chance to become actual shareholders in Bitfinex. I know of some folks who are eager to own the largest $ exchange of BTC.
This will greatly decrease BFX's outstanding liability on a debt basis. I also know of interested parties who MIGHT give BFX a cash infusion for an equity stake. This is the time for them! You buy when there is blood in them there streets and it's mighty bloody out there.
I personally believe the above and a couple options not mentioned will greatly reduce the debt BFX owes it's customers. Traders are likely to not only return in strength, but new customers as well. Your sample day of volume is about to rise significantly. I traded professionally for many years and I'm a contrarian by nature. Disclosure: I have a large position in BFX tokens and it's going to get larger. Bitfinex can actually come out of this situation stronger than ever!
fair points, but I have trouble believing that bitfinex is worth more than $70 mil so even if there is going to be an option to buy a stake in bitfinex with bfx, I don't see it as been a good deal. Are they going to give up 50% equity in the site and value it at $140 mil?
I think I definitely underestimated the volume as we are in a lull at the moment but the only way I see bitfinex surviving is if cryptos increase in value, but if that happens I may as well be invested in cryptos only.
I will be very interested when I see more concrete proposals about equity sharing, zane mentioned that he would have more details about it in a day or 2 about 2 weeks ago, so not sure when the info will come out.
I believe BFX is worth $150 million+, and I suspect they could work towards a one billion market cap if they handle this situation in a fair and semi speedy manner. I think token holders will get some kind of relief/payment over the next few weeks. No, it will not make everyone whole, however it will be made in good faith and possibly push the token price towards .6 or so as people believe they will have their funds returned.
"We are currently working on finalizing exactly how BFX tokens could be converted to shares or equity in BitFinex.
Due to various licensing and legislative issues this is not as straightforward as we would like.
If we do go ahead with this then the goal would be to try and include as many of our loyal users as possible
It is still early days at this stage but we are talking weeks rather than months before we can make any confirmations.
In the meantime we are encouraging our users to at least hold on to their BFX tokens as if we are successful in raising outside capital and also converting a significant amount of BFX tokens into equity we will be in a much better position to repay the BFX tokens to our users at a value of $1USD even to those who do not want or are not able to take part in any equity sharing plans we have for BitFinex"
As you (quite rightly) questioned my numbers, I now have to question yours. how are you arriving at the 150 mil number?
If we give it a revenue to valuation ratio of 10x (which is massive) bitfinex would need to have a revenue of $15 mil a year. but then you can add some for the potential, but bitfinex does not have a unique business or business model that gives it first mover advantage or protects it against competition so I don't see any reason to give it any 'potential bonus'.
Also part of my point was that I don't see bitfinex giving up 50% of total equity.
I do see them managing to pay back if cryptos increase in value and/or bitfinex increase market share, but if they fail to do a combination of these there is a real chance of the value of bfx going to 0.
Also not mentioned is the opportunity cost of having money locked up, say 5% a year, so if they manage to pay back $1 in 2 years you are only getting 90.7% of the value of that $1 now, higher or lower if you feel you can make more or less than the 5% a year
https://www.reddit.com/r/BitcoinMarkets/comments/4x4qlx/bitfinex_company_value/
I read the above thread several days ago and thought I'd share as a starting point. The bitcoin space is red hot regarding venture capital per the many funding rounds in private companies such as coinbase. This is a growth space and it should be valued as just that.
That said, Bitfinex has taken a massive body blow and we all know any investor will expect more equity for less $ at this point in time. I know there are interested parties, however I have no idea what the details look like. I also know there are many token holders who would love (even now) to own a piece of Bitfinex going forward.
I believe their rev number leans towards 20 million yoy, however we all know it will take some time, trust, and proof for customers to return in full force. I suspect Bitfinex can and will actually be the hero when this is all said and done. If so, their growth curve will go parabolic. These are simply assumptions on my part and offer little to no value in this discussion, but I truly believe this will be the case.
I'm guessing (yes, another assumption) 30%+ of the tokens will be taken private via an equity stake. I HIGHLY suspect some folks with deep pockets are actively buying the tokens to get a decent sized equity stake through the discounted back door. Some of these "folks" were interested in Bitfinex before the recent event and they will see opportunity.
These are the folks who still see value and a discount in the current token price. I also think BFX will receive a cash investment and most of the investment will go towards a decent sized payment towards the token holders. The above coupled with future earnings potential can and likely will lead to the complete repayment of the tokens. This will catapult BFX into the most trusted exchange as they capitalize on a big stumble.
My market cap guess obviously includes the tokens at a $1 valuation. I'm including their debt in my above figure.
Phil Potter also stated they are willing to "sell a large chunk of the company if that's what it takes to make customers whole." 4:07
Good thing you are not my accountant