How Undervalued Is Hive?

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All the rage in the world of crypto is market cap. The focus is upon price and what a token is worth. It is interesting to witness the mindset that occurs when people take this approach.

What is really intriguing is how one will take a token price as gospel yet believe the market is nuts when it comes to a stock like Tesla. Or they will believe that Gold is extremely undervalued and the market wrong, yet believe that token ABC is properly reflected by the market.

The reality is the market is often nuts. A look at the S&P 500 might tell you that. However, let's try to put things in perspective.

How big can things get? When tossing out numbers, it is best to have some kind of contrast. What is this number and how does it fit in?

$1 billion is a pretty healthy number. Would anyone be unhappy if Hive was worth a billion dollars? Do you think that possible? After all, from this point, it would be more than 20x.

We can start by looking at Riot Blockchain. Have you heard of them? Do not go looking them up on Coingecko because you will not find it. Instead, head over to Yahoo Finance and enter the symbol RIOT.

This is what you will come up with.

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Here is an outfit few heard of yet it has a market cap of over a billion dollars.

How about this one? Anyone familiar with it?

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This is worth more than 4 times the value of Hive.

So what are these entities? They are crypto mining companies that are publicly traded.

Here is probably the most discussed one, Marathon.

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This one is more than 12x the market cap of Hive. Thus, we can see all of these are much bigger entities.

However, if we look closer, how are they really doing? After all, they are miners of Bitcoin, they have to be kicking ass.

Let us look at the income statement on RIOT, the $1 billion baby.

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As we can see, they operating income was a $10.5 million loss over the last 12 months.

Marathon and Hut8 both were in the same boat, registering $3.8 million and $550K losses for the same time period.

In other words, these entities are losing money, numbers that rival their revenues taken in. Yet they have valuations that are multiples of Hive.

Naturally, this is not uncommon for newer companies to operate in the red for extended periods of time. Growth of market share, technological advancements, and industry maturation are often causes for them.

However, these companies are mining cryptocurrency, how long do you go sustaining a loss? How are they ever going to make it up.

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A blockchain is not a company. This point is obvious. Thus when looking at things, we are comparing apples to oranges to a degree. It is especially true when it comes to something like Hive which is dependent upon what is built on there.

Nevertheless, if we are going to focus upon the financial, i.e. price, aspect of things, what are we really dealing with?

At the end of the day, those who are focused upon price care about making money. Thus, it is the crux of the equation: is this making money?

Obviously, these miners are not doing so well. However, how does this stack up to Hive?

Here is another simple way of looking at it? Are you making money on Hive?

Since there is no centralized company, we simply have to look at the totality of the operations. There are a number of different approaches to making money. If we were to draw up an income statement for Hive as a whole, would we be in the red or green?

The answer is rather obvious. Each day, there are tens of thousands of dollars issued on Hive and associated applications. Over the course of the year, that adds up into millions of dollars that people are receiving in their wallets from associated applications on Hive.

In fact, looking at Hiveblocks, we see the present reward pool has over $100K in it.

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This is, obviously, only one payout method. There are all the different tribes that issue tokens on a daily basis, all carrying some value even if it miniscule. A platform like Leofinance is doling out a significant amount at today's price.


Source

This was last week's token distribution. For that time period, there were over 51,000 tokens issued which equates to an annualized rate of more than $600,000 doled out.

The point is, if we were formulating an income statement, this is revenue. From there, we would deduct the expenses which are the costs associated with running everything. Obviously, this is rather difficult to figure out since there are a lot of variables such as running the blockchain, development costs, and other items. However, for the average users, is there such costs?

Blockchain running is paid out of the reward pool, so that is covered. Development costs often come out of pocket which is why many of the applications are started by those with coding skills. For the rest, we simply show up and participate.

Valuation of an entity is always going to be a subjective number. There are many ways to look at things.

That said, if we compare what the market is pricing some of the miners at, we can see how a blockchain, which is "mining through activity" is offering a much better return for most participants. Thus, a case could be made that the entity that is Hive is undervalued. When we look at what is being distributed, we see millions of dollars going into people's pockets.

Certainly, the fact it is not passive such as buying a stock does add another degree to the equation. Yet, if we figure there is $3 million doled out on Hive in total, annually, with a $50 million market cap, that is roughly 6% return. That sure beats what the banks are paying.

In conclusion, the math is not going to line up perfectly because we are dealing with two different types of entities. However, from the financial perspective, it is all about money and the return. Thus, it is hard to argue that Hive is doling out a return in the form of income unlike the miners, who are losing money.

Nevertheless, Hive's market cap is much smaller.

Just an example of how the market might be mispricing Hive.


If you found this article informative, please give an upvote and rehive.

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47 comments
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I've personally invested large into Riot Blockchain in it's earlier rounds. Very nice to see this happening!

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pixresteemer_incognito_angel_mini.png
Bang, I did it again... I just rehived your post!
Week 37 of my contest just started...you can now check the winners of the previous week!
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(Edited)

Certainly, the fact it is not passive such as buying a stock does add another degree to the equation. Yet, if we figure there is $3 million doled out on Hive in total, annually, with a $50 million market cap, that is roughly 6% return. That sure beats what the banks are paying.

It surely beats what the banks are paying and come to think of it, there is no cost for average user on the platform that even makes it even more profitable. Earning with ease at no cost.

Leo dishing out up to 8000 token per day.... Wow That's alot If you ask me .

The important part is to grow the platform. it shouldn't have to be about the money , we all should focus on the growth and give it time to evolve.

!WINE

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The important part is to grow the platform. it shouldn't have to be about the money , we all should focus on the growth and give it time to evolve.

I agree but when you have the metric of a financial figure, like we do with market cap/token price, that is what most focus upon. The other metrics appear to mean little to them.

The ultimate growth, price or otherwise, will be from what is on the blockchain and how many people are attracted to what is taking place.

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(Edited)

Yes I agree with you that it still comes down to how many people are attracted to what is taking place.

Just as people are attracted towards what's going on with leofinance.

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Interesting information and I appreciate your detailed examination. I've always been weak on the market information and appreciate those who can analyze and distribute their findings. Reblogged and voted.

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Congratulations @taskmaster4450! You have completed the following achievement on the Hive blockchain and have been rewarded with new badge(s) :

Your post has been really appreciated and was the most upvoted of the day

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To support your work, I also upvoted your post!

Do not miss the last post from @hivebuzz:

Guess the producer of the "50 Million Block" and win HIVES
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very interesting article and helps us to understand how the price often does not indicate the health of the company.

Hive needs time, but it will recover the ground lost in recent years both in terms of development and marektinh, and in terms of value.

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I believe it will. The development is forging ahead at a wonderful place.

It is great to see the pieces coming out of Leofinance. Hopefully other tribes are gearing up to follow.

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A lot of the crypto market caps are crazy given the lack of actual usage and utility. Hive should rank much higher. @blocktivity is interesting in ranking by activity. It has a ratio of transactions to market cap (Bitcoin is fixed at 1). Hive usually ranks highly by that, but the number seems broken right now. Hive has about as many transactions as Bitcoin. A lot of that is games, but it shows it is used.

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I never felt that Blocktivity accurately reflected the PoW chains. It always seemed low with both Bitcoin and Ethereum.

But you are right, it is another way of looking at what is taking place on Hive compared to other chains that are ranked much higher.

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That is so strange, I had never heard about these companies. There market cap is really surreal. But this is how the markets work.
HIVE had an anormus potentail, and I hope some day the people will find HIVE.

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The only one I have dabbled in is RIOT as it generally tracks the BTC price recently. It is an easier way to get exposure to BTC without the ridiculous premiums on things such as futures. As for MARA, I have seen people suggest it now and then, but not very often. I don't pay attention to the OTC market much so I avoid them.

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interesting reflections!
like the companies you presented there are many, see for example the homonymous HIVE BLOCKCHAIN, a Canadian company or cypherpunk holdings, perhaps it is believed that just because they are listed on the stock exchange they are better or efficient projects, in reality beyond the market capitalization and of the current general vision by investors I believe that these are worlds that bring a revolution that needs time to find its real applications that are still unknown today, if you too like me invest in these sectors you are the pioneers of mining raw material that we will use to build the future.🚀🤑

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(Edited)

Hive is not undervalued. We have high inflation rate and still don't get SMT on blockchain.
Cut inflation. Cut large worker's funds. Cut HBD convertion system. This first steps that must be done to stop falling price.

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Cutting inflation eill slso lessen the demand and it wouldn't have much affect on price may be, but causing governaeand other issues.
The main thing we need to focus on is development and improvement. This is a social media chain. When thousands if not millions join in we can see a big surge. But we are still not ready considering developments going on ETH regardless it has gas fees. Awareness and marketing needs to be done parallel to improving UI and core features.

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Of the 889k tokens in the reward fund, how much is distributed daily?

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One of the problems is seeing the final price of Hive and not its potential value in the market.

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Very interesting. I guess part of it comes down to how you quantify your time as well. You might not be dealing with energy and equipment costs like the BTC miners are, but you are still taking time out of your day to "earn" on Hive. At this point I don't know as though the time I spend on Hive/Leo each day is worth the rewards that I get. If it were all spare time maybe, but sometimes I occasionally creep into my time that should be spent on other tasks. Those cases would probably equate to Hive being undervalued. I think your idea of perspective in this case is really important and probably what I and other should be focusing on more.

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That is true although the same is true for the time people spend on Twitter and Facebook.

And is all you get out of your time spent on here just financial?

Or is there other benefits you receive.

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There are other benefits, but when all is said and done my wife is probably going to want something more tangible when she asks what all of my time was spent on!

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You forgot to tal about HVBTF - HIVE Blockchain Technologies Ltd. Is 1.97 a share
"Description
HIVE Blockchain Technologies Ltd. operates as a cryptocurrency mining company in Canada, Sweden, and Iceland. It is involved in the mining and sale of digital currencies, such as Ethereum, Ethereum Classic, and Bitcoin. "

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Here is another simple way of looking at it? Are you making money on Hive?

That is the whole problem right there...

If you make money you are taking it out and putting selling pressure on the token dropping the price. If you are powering up you are just sitting on theoretical gains and those are becoming less and less due to all those selling pushing down the price

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It is even funny how HIVE that has a blockchain like few and has several communities inserted with each one with its token and several successful games running can be so underestimated.

Even so I believe that in the future I will book for HIVE. If people are attached only to the price today, they are being very precipitated.

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Well all that amounts to nothing without growth. Without increasing the userbase, there is little extra value being generated.

Hard to have a network effect when there is no network kicking in.

We need more users who are active...it is really that simple.

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I am hopeful that we can see a significant increase in more users on Hive. We must continue with our goal of spreading the word. The future is what keeps us with good hopes for better days for HIVE.

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These companies are in the loss but still, their market cap is high so looking at this I can say that Hive is highly undervalued. I think that its just a matter of time for the hive. I am hopeful with HIVE and other associated projects like Leo and CTP etc.

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Hive is a pretty good platform and token but given the economics, i think it is overvalued. Sad.

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This is an interesting way at looking at Hive's valuation. I instinctively feel Hive is very undervalued, but it is good to see some numbers for comparison.

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Market cap has little to do with value, it has to do with perceived potential value by active market participants.

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Market cap has little to do with value, it has to do with perceived potential value by active market participants.

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I think you should price in the opportunity cost of not holding BTC.

Pricing everything in BTC

Instead of pricing Bitcoin in dollars, what if we price dollars in Bitcoins? The US dollar has gone from 142µBTC down to 35µBTC. This is a 75% drop denominated in Bitcoin. So, let's just price everything in BTC. New Found Gold has kept up with Bitcoin with about a 0% return rate (in BTC) over the year. Tesla has actually out performed Bitcoin.

Apples to Apples

On the other hand, you couldn't have bought Hive a year ago because Hive didn't exist a year ago! You have to take the Steem price of a year ago at 16.10 µBTC and then combine the Steem and Hive prices by adding them together to see where your Steem value would have gone. This is 5.31µ + 3.89µ, which is about 9 µBTC. Steem+Hive has gone down significantly in BTC but has done a lot better than the dollar. In other words:

even if you bought Steem on the last day of 2019 and sold today, and did nothing with the money, you would have done better than one holding dollars

Quit Hive and Steem?

Yes and no. Rather than posting on one or another, many people post on both chains (probably from copying and pasting) and get rewards from both chains. Posting costs almost nothing (as its only staking a minimal plankton account that is necessary). Use affiliate links, and begging addresses, and you may be earn more this way. Over-short terms, you can use Hive backed dollar and Steem dollar. I would avoid buying either of these when they are over the 90% of the value of the US dollar, however. Sell your Steem Dollars.

As a savings instrument Hive isn't the best thing but Steem and Hive can be a way to get others in to crypto that might never had gotten into it. It can be a gateway drug to Bitcoin and liberating us all from needing to store savings in fiat.

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