Why Factom is a buy...
After the latest sale of Factom shares, which is already overfunded long before it ends:
...Investors, Speculators and Traders ask, if the Factoid-marketcap should catch up to the value of Factom-Inc (now $29.2) or not, and generally if Factom (more precise: Factoids) is a buy or not.
And it's really an interesting question if Factom as a company should have higher value than the marketcap of Factoids. Right now it's most likely okay, but just because I don't believe that it's really possible to calculate values before the real show begins: Factom as finished system and ready to use.
But most likely and in case of success, the marketcap of Factoids should and will most likely be above the value of Factom as company.
Let's say $3 Mio (per month) would flow into Entry Credits to factomize all kinds of data of alls kinds of companies and individual users, that would also mean: Factoids for $3 Mio per month would be burned because of "Factoid-to-Entry-Credit-Conversion".
The burning rate on one side and the fixed payment of 73k FCT each month for the federated server make it possible to calculate an equilibrium-price (burning rate = new created Factoids). The calculation for the $3 Mio demand per month per 1 FCT would be:
$3 Mio / 73k new FCT's per month = $41
With other words: If Factom should be used for $3 each month the price of 1 FCT needs to be at $41 - otherwise more Factoids would be burned than new created.
The Factoid-marketcap would be at (assuming the total supply stays stable) = $359 Mio
Of course, it's just a scenario, but I believe Factom even has potential for more.
The interesting point for all potential scenarios is:
If Factom succeeds there will be one obvious indicator --> The number of Entry Credits that are used per month which will have direct effect on the price for Factoids, because of Factoid-consumption/burning. And the psychologically-driven market will do it's own to set the price most likely even higher. Markets tend to price in not just obvious "current" success and facts. It's always about anticipating the future.
The Factoid price will be a mixture of objective EC-demand and speculation on exchanges. I personally expect the equilibrium-price to be a price base but anticipation of future success will level Factoids higher on exchanges - assuming there are no bad news or even good news. I expect good news, because the past already showed a lot of it, just some examples:
The value of the company is much harder to predict in all possible scenarios, because I have to admit: I don't know what is to included. But of course: If successful, they would make a lot of profit because of several reasons if there is high demand for the system. Most likely they will run at least one federated server, they will sell applications, they own a lot of Factoids and they can sell EC's directly etc.
But EC's won't be necessarily a "profit-machine" for Factom because it's possible to buy Factoids directly of the market to convert it into Entry Credits, and there also can be other EC-stores.
My own opinion is that - if Factom succeeds - the marketcap should at least not be below the value of Factom as a company. There is an additional reason for me to think that:
If they shouldn't succeed, it's much easier to get out of it for Factoid-holders. I see that as a Factoid-risk-feature ;-)
But, to be serious again: I really believe that there are high chances that Factom will have success because all signs, fundamentals and psychological signs I know of are on green. And regarding the price for Factoids I focus more on psychological market dynamics than on supposed hard facts. Reason is: Objective informations need interpretation and interpretation is always subjective and highly dependent on attention. And it's never about facts, it's about "impact of facts" on participants. Exactly that is the most interesting and most underestimated subject in this project and often seen totally contrary to my own point of view. If I find out that the "psychological market" lags behind fundamentals it's a buy. And that's the case for Factom since they made their ICO.
If we look at the current price it could be seen as a healthy and a rational anticipation of future success. Why?
The current FCT-price predicts a demand of about 115 Mio EC's per month.
Current price: 1 FCT = 0.00235 BTC = $1.58
New created Factoids per month: 73k FCT = $115,453
115,453 / 0.001 (EC-price) = 115,453,150 EC's
It depends on what somebody believes about Factoms potential if he/she believes to see a buy-signal here or not. But the fun-fact is: The majority still does not see anything. ;-)
It's not irrational to say: Okay, that is way above the current demand and there is not much reason to level it much higher for now.
It's also rational to say: Factom as a system is in development. They've finished 1 of 3 Milestones while M2 can be expected to be released any time. And the real show will begin as soon as the system is finished.
And since there are very good signs, all the good news of the past, partnerships and negotiations with companies and governments, set all fundamental signs I know of on green while I see no sign to believe in the opposite. The M2 delay is seen as negative and in comparison to other Crypto projects people believe to see a lack of communication, but: The majority in this Space (Crypto) still believes in rules that are not common for companies. In comparison to companies, and Factom is not just a decentralized blockchain-project but a company, Factom acts open and transparent.
But agin, and that's the most important aspect in my opinion: The psychological market (attention and some other aspects like "identification" etc.) lags behind the fundamentals.
What I mean with that becomes more obvious in comparison to Ethereum:
Ethereum always got high attention, which can be seen in the highly successfull ICO but also it's price dynamic. And even the headline is a "hit": Smart Contracts. It's an eye catcher that ensures attention - a fascinating mix of science fiction and what is already possible in computer science. But while the ETH-market predicted something that is not rational to expect any time soon, real business, there were several psychological reasons to overdrive the price to a marketcap of above $ 1.5 billion.
The more objective informations and assumptions and also the high risk of a very complex system don't match with that price. In my opinion it's still way too high - Even if the Hard Fork, that will happen tomorrow, will be without any problems there will be sell pressure because of unlocked DAO-ETH's. And even a successful HF is the opposite of a good sign for future trust into the system, even more in combination with obvious risks regarding security. And if the situation would be "okay" (without DAO-hack and Solidity-issues), the question also would be: Is there already a market/demand for smart contracts? My impression is that it's about computer since, about investigating it, not about business yet. And even if, there is no reason to assume it would need that expensive ETH's to meet a potential demand.
Conclusion: The psychological barrier for the market is low in Ethereum, while the barrier to use it for real business is high out of several reasons.
In Factom it's the total opposite. The headline is something like "recording hashes of data". It's not an eye-catcher but in fact a psychological barrier - most of all people just ask "What?". Or that's not even true. Most of all people don't pay any attention and ask nothing. ;-)
But truth is: There is demand for a system like Factom since there is data and it's an increasing market. There just wasn't a system to do what Factom will offer.
Conclusion: The psychological barrier for the market is high, while there is a low or even no barrier on the business side - there is high demand.
Plus: Kind of funny is that while Ethereum is in fact an overcomplex system, Factom is not. But for the psychological market Factom seems to be complex, because the majority does not understand it. It's eco-system, the Factoid to Entry Credit conversion, is also an obvious aspect.
It's a high barrier if we think about it with focus on a psychological market while it's a low barrier to use Factom as a system, because it ensures that companies don't need to touch Crypto (and some other advantages that can be seen here: http://bravenewcoin.com/news/transactional-currencies-entry-credits-and-gas/. )
I could list up more points. But all of these aspects indicate a high barrier for the crypto-community to buy into Factoids on exchanges and a low barrier on the real business side. After figuring that right after launch I bough into it. And in 2015 it was even more obvious because of the total lack of attention which was obvious because of the low volume. And that (lack of attention and understanding) was already true for the ICO. They could have made much more money if people would have understood what Factom is about and which problems it will solve. But the Crypto-space is superficial and with a focus on short-term.
Just by the way: If the ICO would have got more attention of people who would have tried to understand Factom, the ICO would have been not just more successful for Factom, but also: The total supply would be higher and it would have started at a higher marketcap. That's also something a lot of people don't understand.
One additional point, because it's really interesting:
The Factom-team contradicts the psychological market. What I mean with that is: They don't play by "Crypto-rules". They don't communicate that much like other teams with the community. They don't give release dates, they don't care about complaints about a delay, they don't make any marketing for the Factoid-market etc.. Again it needs research to recognize how active they are. They are just not with a focus on "us" Crypto-Speculators, but they are very active regarding development and also in marketing with focus on potential customers. All good news about partnerships are a result of that - and it's more than just obvious that they are very good on that side.
And I don't know if they do it (contradicting the psychological market for FCT's) with intention but they do it pretty effective which can be seen as an indicator for intention.
Is that a bad sign or a buy-signal? In the Crypto-space, with all it's superficiality, it's scams and hypes and impulsive driven markets, it's seen as a bad sign. In fact it's a "deeply green". Every time I recognize that the psychologic lags behind the fundamental signs it's an indicator to buy.
Reason is: The psychological market will catch up. It's delayed which is a good sign because it's a sign not just for fundamental potential that is obvious in Factom. It's a safe sign to be early while the majority still doesn't pay attention. And nobody ever made any profit by being the last one who bought.
And in Factom: Wherever I focus on ("aspects" like it's eco-system or how the team acts etc.) I see those paradoxes, especially in comparison to Ethereum - which was and in my opinion still is nearly a totally psychologically driven ("triggered") market, and the Ethereum team does not contradict it but the opposite. That's also the reason why I expect Ethereum to go down. The psychological trend is broken now because of negative fundamentals and the current situation could be more serious than the majority believes, not just in short term a risk but also in longterm a real problem.
In Factom it's the total opposite what makes it to a "buy" and still gives the opportunity to be in early while others don't pay attention yet, or mis-interpret signals they recognize out of superficiality - Factom is not usual "Crypto" but ahead regarding fundamentals.