HGT analysis - Part 1 - Buy HGT now. Receive 3.8 GBT over 8.80 years. 28-29% IRR.
Since the very beginning of our token sale journey, we knew that there was a lot more to HelloGold Token (HGT) than would meet the eye and we wanted to create a token that would be driven by underlying fundamentals of the business. This is part one of a series of updates focused on informing and detailing the benefits available to supporters. Let's take a quick recap of where we’ve come from before updating you on what is next for HGF (also available to cross reference is our white paper, the original in-depth proposals of the business). We will start with the reward structure as well as our assumptions covered in an earlier post:
HGT REWARDS STRUCTURE:
WHAT DOES THIS MEAN FOR A LEGACY HGT HOLDER?
If you bought HGT in the token sale, you are a legacy holder who had the foresight to see the potential benefits of holding HGT. Since the initial sale price of $24 per 1000 HGT as of August 2017, HGT currently trades at $10 for the same number of tokens (as at 23 November 2017). This 58% fall in value is understandably unsettling for many token holders and we will work hard to address this issue in the coming weeks and months.
But why should you not be unduly worried?
Figure 1 - HGT return (%) based on the original plan
The total number of HGT is limited to one billion tokens and will potentially have a GBT distribution of 3.8 million (RewardGBT). This means once all the RewardGBT has been distributed, each legacy holder will have received 0.0038 equivalent grams of gold. With this, a legacy HGT holder who spent $24 at the time of the ICO will receive 3.8g of gold over the next 8.80 years.
Figure 1 above illustrates the HGT return plan by taking into account the projected gain in value of the underlying asset (gold) which is directly reflected in the price of GBT. The gain is estimated at 5.49% year on year (based on the spot price of gold for the last 20 years). This translates to a value of gold (if HGT/GBT are held throughout) worth more than 1000% the legacy HGT holder's initial purchase.
Clearly the potential return on the initial purchase is mammoth, but how does the current price of HGT affect your return? Put simply, it doesn't! Because the GBT reward is issued per HGT, the market price has no effect on the reward. In fact, as HelloGold Foundation will provide further rewards for future projects to HGT holders, the potential exists to sell your HGT after receiving your full allotment of GBT to boost your returns even further!
WHAT HAPPENS IF GOLD PRICE CHANGES?
Figure 2 - HGT return (%) based on change in gold price
Earlier, we explained why legacy HGT holders shouldn't worry about the token price given the historical long-term growth in gold prices. However, will this projection stay true if gold prices remain flat or in the worst case, gold prices experience an unprecedented period of continuous negative growth? Thankfully, the answer is still a resounding yes!
Assuming the gold price remains stagnant (no change in price) in the foreseeable future (ten years), a legacy HGT holder will still receive a potential return of 675% with RewardGBT at year 8.80. In this instance, the payback period for the initial HGT purchase would be at year 5.64, which is only one month difference from the payback period depicted in Figure 1 (where gold prices rise 5.49% year on year).
Now, imagine the worst case scenario where gold prices move in an unfavourable direction in the next few years. In Figure 2, we illustrate the effects on both potential return percentage and payback period when gold prices fall at a rate of 5.49% year on year. In this instance, legacy HGT holders will still receive a maximum potential return of 436% and payback period at year 5.68, a timeframe similar to the growth and stagnant models shown previously.
This ultimately demonstrates that the main potential of HGT lies in the growth of our assets under management (AUM). Now, if you’re still wondering why you should hold HGT, think about how many tokens can offer a potential distribution which equates to approximately 28%-30% p.a. over the RewardGBT lifetime.
HOW AUM AFFECTS POTENTIAL RETURN?
In this final section we look at the last factor affecting your return: HelloGold performance.
HelloGold Foundation has pledged 3.8m RewardGBT with a projected timeline of 8.8 years. The question is, could this be any faster? RewardGBT is directly proportionate to HelloGold AUM - therefore, the faster we build our AUM, the earlier the return is realised. For instance, if our projected AUM targets are each reached one year sooner, the chart below will shows the effect on both return and payback period:
Figure 3 - HGT return (%): fast forwarded plan (orange) vs original plan (black)
The figure 3 shows that if HelloGold’s AUM targets are reached faster, return on HGT is identical with the timeframe accelerated. Further good news for HGT holders!
Our next article will delve deeper in the value of the HGT token and its hidden benefits, we will compare it to other financial instruments that offer similar cash flows and the comparative cost of exposure.
You can buy HGT:
At ETHERDELTA, HITBTC, COSS, RADAR RELAY
Details for future offerings of HGT can be found here.
The HelloGold Foundation Team