Hit by the FOMO virus I decided to take a closer look at the cryptomarket. That didn’t change much to my view on the crypto-market. The valuation of the coins make no sense to me at all. I was even more surprised by the lack of valuation attempts by people who write about the coins. A typical (or maybe even above average) valuation is often as follows:

**Typical valuation**

*Coin will increase 50% in value because of patch x3.7**Coin will increase 300% because of the launch of a beta product**Coin will increase 200% because [some random crypto words]*

*A combined 800% increase in value! Buy them today! We don’t have to talk about competition, that does not apply to crypto!*

The worst part, the valuations often come true at this stage of the bubble. This makes the writers more confident about their valuation skills, resulting in even more comical work. It is also possible that I haven’t found the right sources yet. If so, please let me know.

On the one hand, it is quite funny to observe this all. On the other hand it is quite difficult to manage your emotions as a value investor who performs actual research to make a decent profit in the stock market. I have the feeling that my valuation skills impede my chance of success in the crypto-market and that it is therefore better to stay away from it. However, during my research I stumbled upon an interesting token which has the potential to be worth multiples of the current price (BASED ON VALUATION PRINCIPLES). This gave my FOMO infected brain the last push resulting in my first crypto investment.

Before going into the valuation: I believe in the blockchain technology and can’t imagine the crypto-market to go away anytime soon.

This blog post is a short introduction to the TRIA token. More posts will follow with my own estimates of key variables and research on other important topics such as competition and the company behind the token. At this moment I don’t apply the same margin of safety as I do with stocks (FOMO alert) because we have the random crypto bubble factor thrown into the mix that often results in excellent results, even if the underlying asset does not perform. A result of this lower margin is safety, is that my investment in the TRIA token is only a small part of my portfolio.

**Why the TRIA token has the potential to be worth multiples of the current price?**

Summary: The TRIA tokens are entitled to 50% of the trading profit of all coins created by Triaconta. A company in the Netherlands focussed at creating types of indextrackers for the crypto market. They currently have one coin (CombiCoin, tracking the top 30 crypto-currencies) which will be listed on an exchange at the end of this month. They clearly have a first mover advantage, as there are limited comparable products yet. Using the popularity of indextrackers in the stock market as a proxy for interest in comparable products in the crypto market I see the potential for the CombiCoin to attract serious trading volumes. If it does, the TRIA token is a home-run. The total market cap of the TRIA token is only $10m and the Company has a viable model to profit from CombiCoin trading volume.

*How Triaconta generates trading profit and why it is important for the CombiCoin*

When someone is looking to buy the CombiCoin it is important that the price of the coin is not much higher than the value of the underlying assets. Otherwise you are paying a premium compared to buying the underlying assets yourself. It is also important for CombiCoin holders that the price of the CombiCoin is not significantly lower than the price of the underlying assets. Otherwise you are selling your CombiCoins at a discount to the value of the underlying assets.

Triaconta’s trading software will keep the value of the CombiCoin close to the value of the underlying assets and hereby generate a profit. The picture below from the whitepaper clearly explains how this works:

With the profit generating mechanism explained, we can move to the valuation fundamentals.

*The value of the TRIA tokens should be based on the future income of Triaconta’s trading software to manage the CombiCoin’s price and also that of future coins issued by Triaconta.*

There are a total of 276,001 TRIA tokens outstanding. These were released as bounty during the ICO of CombiCoin and are fixed. At the current price of $35 per TRIA token this results in a market cap of $9.7m. It’s the market’s estimate of the discounted value of all future TRIA dividends.

The TRIA dividends are paid monthly. The total dividend can be calculated as follow:

[A] Total trading volume (in $) of CombiCoin **x** [B] % of total trading volume executed by Triaconta’s trading software **x** [C] average profit % generated by trading software **x ** 50%.

TRIA dividend = A x B x C x 50%

In the ICO whitepaper Triaconta makes the following estimates:

- [B] % of total trading volume executed by Triaconta’s trading software = 35% (average)
- [C] average profit % generated by trading software = 5%

I think that the average profit % will lower significantly over time. Today it may be possible as the market is extremely inefficient.

Using Triaconta’s estimates and some estimates for the total trading volume gives some feeling about a bull scenario:

*[A] = $50m per month (volume rank 246 on Coinmarketcap)*

Annual dividend = $50m x 12 (months) x 35% x 5% x 50% = $5.25m

*[A] = $100m per month (volume rank 191 on Coinmarketcap)*

Annual dividend = $100m x 12 (months) x 35% x 5% x 50% = $10.5m

*[A] = $200m per month (volume rank 143 on Coinmarketcap)*

Annual dividend = $200m x 12 (months) x 35% x 5% x 50% = $21m

In follow up posts (at the earliest next weekend) I will dive deeper into:

- Estimates of the variables determining the dividend ([A], [B] and [C])
- CombiCoin properties compared to competitor’s (e.g. no management fee)
- The company Triaconta and it’s management team
- New entrants and effect on valuation