0/ Today I'm excited to share Multicoin Capital's analysis and valuation on Huobi Token $HT ! It's available in English, Chinese, and Korean

*Disclosure: we're long $HT https://multicoin.capital/2020/07/16/huobi-token-analysis-and-valuation/

1/ We have previously expressed a thesis that exchange tokens are the best way to get exposure to open finance. Significant barriers to scale gave incumbents a clear competitive advantage. We've also seen the horizontal product integration (e.g.futures) by the biggest exchanges

2/ Exchanges are also able to be nimble with token economics and introduce new use cases to their tokens over time. We’ve seen this with virtually all exchange operators, whereby they add new products and integrations to offer token holders advantages over other users.

3/ We track the exchange token market closely, and through our ongoing analysis we noticed that there was a divergence between the fundamentals of Huobi and the current market cap of Huobi Token ($HT).

4/ On a high level:

a) $HT is the best way to get exposure to the crypto "China Thesis"
b)Huobi's volumes are real
c)Huobi is committed to be more transparent
d)Huobi made significant progress in derivatives trading
e)Huobi Chain is done as a partnership with @NervosNetwork

5/...and most importantly,
f)$HT currently has the highest buyback ratio of any exchange token on the market at 17.8%. $HT’s buyback ratio is 4.4x higher than industry average. Based on LTM burn metrics, that would imply a $HT price of $4.3B, representing as much as 345% upside

6/ In March 2019, Bitwise shared their seminal market infra report with the SEC, claiming only 10 crypto exchanges have real volumes. Huobi was excluded from that list. Since, we have found that most Western-based audiences ignore Huobi, blindly believing the volumes are fake

7/ Based on the data from CoinAPI and CryptoCompare, it is clear that Binance and Huobi are both dominant among the 11 exchanges (Bitwise Real10 + Huobi), and Huobi is a top 2-3 spot exchange globally.

8/ Outside of spot trading, Huobi has also been giving outstanding performance. Despite lack of public information, our interviews with multiple market makers and asset managers indicated that Huobi’s peer-to-peer OTC platform regularly processes over $100M of volume per day

9/ Similarly, the growth for Huobi Futures was aggressive. The trading volume of the expiry contracts at Huobi quadrupled year over year from April 2019 to April 2020. Huobi’s robustness on March 12 explains why it’s able to command the Chinese market and attract brand loyalty.

10/ Along with the Huobi Chain effort, which is a fruit of partnership with Nervos Muta SDK, Huobi was also a leader in exploring Defi space. Huobi was the first centralized exchange to offer its custodial ERC-20 HBTC.

11/ Huobi was one of the first cryptocurrency exchanges in China. “Huo” means fire in Chinese, and “bi” means token.

Huobi has an eventful history. Like a phoenix, it battled through trial by fire and emerged from the ashes stronger. It survived multiple regulatory crackdowns.

12/ The Chinese government has been known for its hand-holding style managing the private and public sectors. Alipay is a quintessential example: it was gray for years before getting a license; now it is one of the biggest payment platforms thanks to the government blessing

13/It's hard to be an early bird, and considerably harder to be an early bird that lasts. Huobi is a lasting early bird. After multiple bull and bear cycles, Huobi has consistently been able to capture market opportunities, and maintain its edge as the dominant exchange in China

14/ In short, we have strong conviction that $HT is undervalued.

Special thanks to our exchange expert @SpencerApplebau , without whom this report will not exist. Also to @mattshap1 and @TusharJain_ for the feedback.

Please feel free to reach out to either of us.

{fin}