Dear Bankless Nation,

The second Bankless Token Report is here!

In case you missed the first report, these reports are meant to give you our FOR YOUR ENTERTAINMENT ONLY analysis on whether you should buy, hold, or sell certain tokens based on our valuation models.

• ✅ overweight

• ➖ neutral

• ❌ underweight

You get these on the first Friday of every month as part of your Bankless Premium Subscription.

This month we’ve initiated coverage on BTRFLY, LDO, DYDX, PERP, and COMP. 🔥

The first token analysis is open for everyone :)

You ready?

Let’s get to the Ratings! 🚀

- RSA

🚨 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 | May 2022 📊

Analyst notes, coverage, and six-month price targets on DeFi’s largest tokens. 

This report initiates analyst coverage on five tokens: BTRFLY, LDO, DYDX, PERP, and COMP.

Below, we discuss the rationale behind our rating for each token as well as provide our estimate of each token's intrinsic value based on a discounted cash flow (DCF) model. 

Our models are intended to value the core business of each protocol, regardless of whether they direct a portion of the revenue generated to tokenholders (just as non-dividend paying equities are valued using this type of analysis).

Rating Scale and Fair Value Estimates

Before we dive into the coverage and ratings, we’ll take a moment to explain our rating scale and fair value estimates. 

Our ratings reflect how we feel each token will perform over a six-month time horizon relative to the performance of the overall crypto-market (based on market capitalization).

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 relative to the market over the next six months.

As a basis to help inform our ratings, we also provide valuation estimates for each of the covered tokens, which we derive using a discounted cash-flow model. This analysis aims 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.

✅ [Redacted] Cartel (BTRFLY)

🏅 Rating: Overweight
💲 Current Price: $84.83
🎯 Fair Value Estimate (Price): $115.32

• We initiate coverage of BTRFLY, the governance token of [Redacted] Cartel, with a rating of overweight.

• We are assigning this rating due to the upcoming Redacted V2 tokenomics upgrade, which will see the transition of BTRFLY away from rebases, and introduces a two-token model of glBTRFLY and rlBTRFLY, which entitles governance rights over the assets in the [Redacted] treasury to holders of the former, and the rights to revenue earned from the DAO’s businesses and farming activities,to the latter.

• While glBTRFLY’s launch is not imminent, rlBTRFLY is expected to go live sometime in May 2022, with its deployment marking the end of BTRFLY rebases. The proposal also coincides with the recent launch of Hidden Hand, a marketplace for tokenholder governance bribes that currently supports BAL, TOKE, FXS, and RBN.

• We feel the launch of rlBTRFLY will be value accretive to tokenholders. The removal of rebases will see emissions drop from ~1100% to an estimated range of 40-50%, a substantial reduction in sell pressure on the token, while providing holders with a means to generate income on their assets through revenue sharing.

• We feel this, along with the increased adoption of Hidden Hand for bribes, such as with Tokemak’s C.O.R.E3 vote, will also help to drive growth in [Redacted]’s core businesses. Furthermore, we believe that BTRFLY is undervalued at current prices based on the growth prospects of Hidden Hand and farming income from the treasury.