After buying some COB tokens equivalent to shares of Cobinhood’s current initial coin offering, the whole reality of the crypto frenzy dawned on me.
The blockchain technology is here to stay!!
What prompted my interest in Cobinhood ( which is a zero-fee crypto trading platform) was the ingenuity of its founder who took a lesson from Robinhood ( a free stock trading platform). Given the brilliance of Robinhood which is arguably the trading platform with the largest population of millennials, it isn’t hard to fathom why Cobinhood is such a good idea.
Here is the rationale behind my thesis.
Millennials...young tech savvy programmers and anti-central bank buffs are the one’s fueling the current crypto mania. Therefore, the perfect elimination of the middle man and his huge buyer-seller matching engine which charges a huge premium off all money exchange makes good sense if we can reduce the trading fee on exchange/trading of cryptocurrencies as well.
Enter Cobinhood!!!
Product
Cobinhood’s product is a proprietary crypto exchange platform with zero trading fee. Other features include:
Support for a wide range of Fiat currencies
High Performance Order Matching Engine
Secure Crypto Asset deposit
Given that it will be a zero trading platform, it is important to answer the question of revenue generation.
According to management, revenue will come from:
Margin trading loans
ICO underwriting
Management
Management is currently made of of a team of over 20 tech savvy personnels. Popo Chen, a 26 year old entrepreneur serves as the CEO bringing in a wealth of experience from his previous entrepreneurial forays.
Macro Exposure
Cobinhood’s valuation will closely track the overall market sentiment towards ICOs and cryptocurrencies.
Currently, sentiment is near an all time peak with the value of bitcoin a leading indicator of the level of optimism and acceptance of alt coins.
The big threat here comes from the vulnerability of the blockchain technology powering Cobinhood’s trading and crypto asset storage to cyber attacks. To counter cyber attacks on its platform, management has this to say:
COBINHOOD stores the vast majority of the crypto asset deposits in an offline multisig vault, which requires 5 out of 8 geo-distributed hardware security modules to open. Furthermore, crypto assets stored in online wallets will be backed by insurance.
This means most of the cryptocurrencies help by Cobinhood will be stored offline away from the prowling reach of attackers aiming to own its online assets.`
Valuation
With 1 billion coins in circulation, Cobinhood has a market cap of $61 million using the current conversion rate of $0.061/COB.
While this is speculative at best given the myriad of cryptocurrency exchanges out there, management’s vision and business model are convincing and a smooth execution will flatten out the uncertainty in Cobinhood’s long term sustainability.
Given its lack of revenue, it will be pointless to estimate a sales/profit multiple. However, growth will come from the increasing adoption of cryptocurrencies as a legal tender while Cobinhood swipes market share from incumbents by marketing its zero trading fee strategy.
Risks
A cyber attack on Cobinhood’s exchange
Competitors offering a better zero-fee exchange
A government ban on all cryptocurrencies
Poor execution on the path of management