What is the role of investors in Crypto? Before starting a valuation of the SKY token, I think it’s necessary to reflect on the role investors play in the Crypto ecosystem. The reality of the financial markets is that the ownership of the world’s leading companies is highly concentrated. The value creation in these companies is often distributed very unequally. Typically, the great fortunes we see in the world are often associated with the founders of large companies who have capitalized on most of the value they’ve created, sharing a significant portion with venture capital funds and, lastly, with a select group of employees. Customers, of course, were never part of that equation until Crypto arrived.

The Ownership economy aims to change this reality in the distribution of ownership. But in order to start changing this situation, we need a significant cultural shift. Because if being an investor continues to be associated with an extractive role in society, people will mostly sell those tokens and not retain ownership. Additionally, projects will never prioritize the interests of those investors, and therefore, the effort to distribute wealth will be in vain.

I’d like to share a reflection on the so-called evil speculators.

I believe it’s important for the SKY project to take care of its investors and, as much as possible, encourage a wide distribution of ownership. I think this is beneficial for the project because, in addition to having a community of people aligned with the goal of making the project successful, if the market recognizes its value, this gives the project greater financial strength to grow.

In this regard, I believe some of the decisions made by the DAO have lacked the sensitivity to recognize the role these investors play, and this partly explains the lack of incentive to be a token holder in the project

SKY Token Valuation

Sky is one of the protocols showing the best financial metrics. It ranks 5th in revenue across the entire crypto ecosystem; however, it is significantly far from the top positions in the market capitalization ranking, currently sitting at 61st place.

The protocol's net profit in 2024 could be around 50 million, assuming the significant launch costs of all sub-DAOs, which in the future, once they become independent, should no longer incur. This, even in a scenario where the project doesn't grow, would lead the protocol to generate revenues exceeding 100 million.

The current estimates already show a profit of 100 million, as indicated by the Dashboard, with expenses that should be significantly reduced.

The most important metric for the project is the loan volume, which currently stands at 5 billion. This market share is far below the expectations set by the project, especially considering it once reached 10 billion. It is a crucial moment for the project, as it has been working for nearly two years to lay the foundation for growth, which so far has been disappointing.

What are the reasons behind this market undervaluation?

• Growth Scenario

  The market is pricing in the belief that Sky will not be able to grow with this new strategic shift. The data in the coming months will confirm the correct scenario. The start, certainly, hasn’t been explosive, but the trend has shifted, and my outlook is that the protocol should reach 7 billion by the end of the year. There is significant criticism regarding the ability to freeze funds, as it potentially undermines its anti-censorship properties, but this doesn’t seem to have been an issue for Tether. Moreover, the demand for fully decentralized stablecoins hasn’t been significant. In any case, SKY will soon have its decentralized option available to meet that demand.

  SKY's objective should be to take over the space currently held by USDT or USDC, capturing market share in a sector that continues to experience strong growth and is expected to exceed 200 billion. A 10% market share would mean reaching 20 billion. It is a complex challenge given that a large portion of these stablecoins are primarily used on centralized brokers, which find it difficult to collaborate with DAOs. However, there are certainly many additional opportunities that the development team should be exploring, and in this new phase, these should be taken on by the SubDAOs.

• Gross Margin

  We should see an increase in the gross margin, as the interest rate for those investors who choose to receive remuneration in DAO tokens will go directly to Sky. It will be crucial to see how the market initially values these tokens, as the interest rate will depend on that value. End Game is an attempt to revitalize an organization that has struggled to find growth solutions, while incentivizing the creation of DAOs by offering attractive interest rates. However, returns on stablecoins in the crypto space are highly competitive, and rates need to be around 20% to drive significant growth, as we have seen with Ethena

• Token Value Capture

  Even if growth could be strong and margins increase, the market has certain doubts about whether the token will actually capture all that value. Token holders will not directly receive any incentive from the launch of the SubDAOs, which certainly sends a negative signal to the token holder who receives no reward for having financed all these subDAOs. It's true that this value is expected to be captured in the future, but the opportunity cost is significant, as it could have been disinvested during all this time. The new token's launch is changing the conditions and expanding the number of tokens indefinitely at a rate close to 3%. This dilution will benefit stablecoin holders, but it is not easy for the project to recover this through fees.The mistreatment of token holders certainly seems like a strong reason for diminishing the token's appeal

Token Valuation

The conservative estimate for the price of MKR would be 2500 by 2025 (0,10 SKY)

The market has certainly punished the token severely, performing much worse than the rest of the market. It is reasonable to think that the project could surpass 10 billion in stablecoins by mid-2025 in a scenario that I consider very conservative. Reaching 100 billion, as is being proposed, would put the project in stratospheric numbers.

However, the fundamental issue is whether governance will continue to mistreat token holders by reducing revenue with more protocol expenses and not allowing them to directly participate in the value creation of the projects. One alternative could be, for example, to offer staking rewards for MKR or SKY, something that is still not available. The issuance of new tokens certainly limits the token's appreciation. Strong growth should have a positive impact on the token even with these governance decisions.

References

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