It’s been a couple of months since our first “How to value Refi” article and since then a lot has changed. Since we have now launched ReFi Pro, we’d like to revisit and revamp our financial models for valuing the $ReFi token.
Since our last update, markets have been incredibly volatile and trending downwards. Fortunately, our portfolio has handled the turbulence well. In the process, we have launched ReFi Pro, a capital-efficient way for institutional investors to access our expertise.
In this article, we’ll revisit our DCF model from prior, adjusted now for the new additions and changes we’ve made to the $ReFi tokenomics.
In short, the tax on buys and sells (transfers) is now only 6%, with the entire 6% is distributed as a reflection claimable on each token holder’s page within our dApp. Furthermore, with Refi Pro, 2% of all new deposits will be sent as an upfront management fee to the ReFi Treasury. Finally, upon withdrawal from ReFi Pro, a 20% performance fee will be taken from profits, half of which will also be sent to the ReFi Treasury.
These are our new assumptions:
Trading Volume: Currently 6% of every transaction is taxed and automatically sent as reflections to current $ReFi holders. We will assume an average starting daily trading volume of $30,000. We assume that this volume will increase by 20% each quarter.
Farming Yield: Over the last 100 days, our farmers have returned 46.4% of net profit on capital deployed. We will assume this growth in the future, which equates to about 43% every quarter (~91 days). It’s important to note that these yields were achieved in bearish and choppy markets and again highlight the ultra-conservative nature of our model.
Expenses: Every week, ReFi incurs $20,000 in expenses, which includes platform costs, marketing spend, salaries and business development. We expect this to increase 5% each quarter, although, in reality, it will likely be less in the long run since digital asset firms like ReFi don’t have rent/building expenses and other large operating costs.
Refi Pro: Users deposit USDC in between each Epoch (month), and 2% of each deposit is taken as a deposit fee, and sent to the ReFi Treasury. This can be thought of as the management fee for a traditional investment fund, except this 2% is only taken once, on deposit, as opposed to yearly. When users withdraw their USDC, 20% of the profits are taken as a performance fee/carry. Half of this performance fee is also sent to the Refi Treasury. We estimate a 25% churn in deposits each epoch (month). Further, additional AUM deposits are assumed to grow by 10% each quarter.
Opportunity Cost of Capital: This percentage indicates the opportunity cost of investing your money with ReFi. In a DCF, this is the percentage by which the Cash Flows are discounted back to present value. This is a bit tricky to estimate. In this case, we assumed 10%, which is a baseline opportunity cost.
We will assume 3 different scenarios for Initial Refi Pro deposits, $1m, $5m, & $10m. Below are our calculations for a $1m initial Refi Pro AUM for Month 1.
With the assumed starting Refi Pro and Treasury balance, we see we end up with $750,000 of churn ($250k each month for 3 months). Combined with the 10% additional User deposits generates $17,000 of deposit fees sent to the treasury. Half of the performance fee of 20% (carry) is also sent to the ReFi Treasury.
Investing estimates and yields are calculated for both the treasury and users’ funds in Refi Pro. Finally, below you can see estimates of PV of reflections sent to token holders from the 6% reflection tax on transfers as well as the PV of the treasury in the future.
Using these PVs, we can find a hypothetical MC for an “x” year duration investment period, using this $1m initial Refi Pro estimate.
For example, a 3 year DCF would result in $5.27m of reflections, and a $13.29m present value treasury, resulting in a hypothetical $18.56m market cap. This number greatly increases when looking at a longer time span due to the effects of exponential growth. It’s important to note that most traditional DCFs are looking at a 10-year investment window, in which case ReFi is a $1bn+ company.
These are only with a very conservative $1m initial Refi Pro AUM. Below are hypothetical MC’s for the other $5m and $10m initial Refi Pro AUMs.
Additionally, this modelling also does not take into account any future product developments or partnerships by the team that could lead to rapid acceleration of the Treasury balance. Indeed, even in this conservative financial model, the ReFi token is currently “cheap” at around $10mm market cap.
The team at ReFi has been consistently growing these past few months and rest assured, you are in good hands. We have a variety of exciting updates and news in store for you all and are all very excited for the future of this project.
As always, we appreciate your time and thank you for reading.
$REFI is an investable ERC-20 token that provides DeFi as a Service, available on both Ethereum and Binance Smart Chain.
ReFi Pro is our institutional investment solution for high-net-worth individuals, DAO Treasuries and other crypto-native firms.