Bankless Token Ratings | July 2022
ATOM I SOL I AVAX I PERP I TRIBE I SUSHI
Dear Bankless Nation,
It’s the first Friday of the month — that means token ratings!
The market is all kinds of bearish, but we’ve been searching wide for the next great opportunities. Some may have been hiding in plain sight all along.
…We even stumbled across one yesterday:
Zac Prince @BlockFiZacLots of market rumors out there - I can 100% confirm that we aren’t being sold for $25M. I encourage everyone to trust only details that you hear directly from @BlockFi. We will share more w you as soon as we can.
Bankless Token Ratings are an ENTERTAINMENT ONLY analysis on whether you should buy, hold, or sell certain tokens based on our valuation models.
This month we’re initiating coverage on ATOM, SOL, AVAX, and revisiting PERP, TRIBE, and SUSHI 👀
Bankless Premium Subscribers get full access to the report.
Let’s do this. 🚀
— Bankless Team
🚨 None of the information in this article is financial advice. All of it is for educational purposes only. Please do your own research.
Token Ratings | July 2022
📊Analyst notes, coverage, and six-month price targets on DeFi’s largest tokens
This report initiates analyst coverage on three tokens: ATOM, SOL, and AVAX.
It also changes coverage on PERP, TRIBE, and SUSHI.
We’ll discuss the rationale behind each rating by delving into the catalysts driving coverage, as well as the impact on token price.
We’ll also provide an estimate of each token’s intrinsic value based on a discounted cash flow (DCF) model when applicable. These models are intended to value the core business for protocols generating revenue for their respective DAOs. Not all protocols covered are generating revenue.
We are also excited to announce the debut of the Bankless Token Encyclopedia!
Intended to complement our ratings and valuation models, the encyclopedia aims to be the one-stop-shop where investors can get all the relevant information they need about each token we cover, whether it be fundamentals, financials, tokenomics, and more.
🔓 Unlock the Bankless Token Encyclopedia
A one-stop document for all relevant token information
Already a premium member? Tap into it below after the Token Rating Updates!
Rating Scale and Fair Value Estimates:
Before we dive into the coverage and ratings, let’s moment to explain our rating scale and fair value estimates.
The ratings reflect how we expect each token will perform over a six-month time horizon relative to the performance of the overall crypto-market based on market capitalization. It is not indicative of our opinion on the long-run potential of each token.
The rating scale is as follows:
✅ Overweight: We expect this token to outperform the broader market over the next six months.
➖ Neutral: We expect this token to perform in line with the market over the next six months.
❌ Underweight: We expect this token to underperform the market over the next six months.
To help inform our ratings, we also provide valuation estimates for each of the covered tokens in which it is applicable. These valuations are derived via a discounted cash flow model and aim to value each protocol's core business offerings based on the revenues it generates and its future growth prospects, which are influenced by the catalysts discussed in this report.
While these models are certainly not the only factor that goes into determining a token’s rating, especially given the short-time horizon on which they are made, we view these fair value estimates as the price ceiling under which we would consider the token to be undervalued and if above, overvalued.
Now that’s out of the way, let’s dive into the report.
📊 TOKEN RATINGS | JULY 2022
➖ Cosmos Hub (ATOM)
🏅 Rating: Neutral
💲 Current MC: $7.56
🎯 Fair Value Estimate (MC): n/a
We are initiating coverage of ATOM, the staking, gas, and governance token of the Cosmos Hub, with a rating of neutral.
This rating is being assigned due to the announcement of dYdX Chain.
On June 22, dYdX — the largest decentralized perpetuals exchange by trading volume — announced it would be launching the upcoming V4 iteration on its own proof-of-stake blockchain built using the Cosmos SDK.
dYdX intends to make the transition from StarkEx, the zk-rollup solution upon which V3 is currently deployed, to the Cosmos ecosystem. The reasons are multifold: in order to increase performance, ensure regulatory freedom, and to obtain finality over protocol functions. dYdX intends to use its native DYDX token to secure the network.
ATOM will not directly accrue value from dYdX Chain immediately, as there are no indications that the platform intends to leverage interchain security. An upgrade enabling chains to utilize the Cosmos Hub validator set secure app-specific networks is expected to roll out in Q3, and the news still serves as a source of significant validation for Cosmos’s app-chain model.
Given that dYdX was one of the first prominent applications to adopt Ethereum L2, it is likely it is an indicator that more teams and projects will migrate to or build on Cosmos. Assuming this is the case, it is likely that some will leverage interchain security once it goes live, helping drive demand for Hub blockspace and ATOM.
Given its role within Cosmos, it is likely that investors will see ATOM as a way to gain broad, indexed exposure to the growth of its ecosystem as a whole. This may keep its price in-line with broad assets like ETH and BTC, despite bearish conditions that will punish small to mid-cap assets.