AAVE token valuation

Today we will talk about the valuation of the aave tokens, which is the backbone of the aave platform. There is much information available from the aave platform to do the valuation of the aave token. The aave platform has a total value locked worth 10 billion USD. But before we do the valuation of aave, we need to understand the basic thumb rule of valuation. If we don’t know what principles we are using to do valuation we can’t learn and gradually we can’t grow. So valuation principles are extremely essential to understand before becoming a smart fund manager or growing as an investor.

So what buffet and many other greats have mentioned since the last century is a simple valuation principle that if a company is making 10 Million USD in profits every year the valuation of that company is around 100 Million USD… Now how did we come to this conclusion ? …So the simple math behind this is that if you give someone a loan then you would expect around 8 to 10 % in interest from the borrower..correct? so over the period of ten years, you would eventually get your entire capital worth of money back … So a 100 percent profit….so if you can double your money in a decade it should be considered a fair deal…It is very essential to understand this principle, if you don’t understand this then you can join our telegram group to ask as many questions as you want.

So before I apply this method to aave token I want to mention one important thing which is that one has to use every possible information available from the project in order to do the valuation .. every line of information from twitter to telegram to medium blogs…every line is important because it is somewhere in those videos and articles where you will have the necessary information to do the valuation. Now let’s apply this method to the aave token.

So aave has around 10 billion USD worth of total value locked…So if you haven’t done the valuation of any lending borrowing platform before, I would like to mention here that as a rule of thumb, 1% of total value locked is generally the profit margin of the platform. So here as 10 billion is total value locked their profit margin yearly should be around 100 Million USD…As their yearly profit here looks around 100 million USD their valuation should generally be around 10 times the yearly profit. So it should be around 1 billion USD…Now if you check the current market cap of aave platform then it is also around 0.8 billion….this means that from the first look of analysis this platform should be fairly valued…Generally, when you buy a fairly valued asset, it gets really hard for an investor to make money. Why? because the valuation is fair so the price doesn’t carry a theoretical way of going up…But at the same time if you buy an undervalued asset , price will eventually go up as the price always catches up with the value. That’s the secret of investing world which is now almost open thanks to people like Warren buffet. If you are looking for undervalued assets then I would recommend you to watch our FTX token analysis video which seems pretty undervalued.

Now this analysis is only based on quick assumptions from past experiences which are generally correct… In this analysis, we haven’t included the long-term growth of aave protocol which can only be understood by knowing what amount of monopoly aave protocol carries in lending and borrowing market. If the protocol carries a big amount of monopoly, this asset can again become undervalued…We just calculated the current valuation which doesn’t include all these analysis. At the same time if the protocol carries no big monopoly like bitcoin carries then buying such an asset at a fairly valued price can be extremely dangerous and an investor may even lose money. I am not saying this will happen in this protocol but you will have to understand all the factors before investing.

I want to now talk a little bit about our coin … a lot of people can have limited capital to invest even if they have the skills to invest and that’s why long term protocol gives capital to invest if you are a skilled fund manager who either sensibly understands valuation or carries trading skills.

As you can see this article in which there is 50% weightage given to the amount of long-term coin you buy from our token sales and remaining 50 % is given to the returns you give consistently on all these defi protocols like enzyme finance and couple of other protocols. So earlier you own long-term coin lesser returns you can afford to give and still will be able to manage funds in higher amounts…it might sound little hard to understand initially but you can join our telegram group and ask as many questions as you want to understand the protocol. link for telegram is available in the description. We will happy to assist you. Your commitment towards understanding our protocol can make and break lot of things for you… Go through our medium articles and our youtube videos to understand how owning more and more long-term coin can help you massively to claim more and more funds to manage because even if you have skills of buying undervalued assets you will need increased capital to invest without getting liquidated.

So becoming a fund manager and managing other investors’ funds is hard but we believe in your skills and that’s why we are inviting you to understand our protocol and start claiming funds to manage. Here either you can own fewer long-term coin tokens and give higher returns or you can own more and more long-term coins and can afford to give lesser returns and still be able to claim a massive amount of funds to manage. In long-term coin protocol, everything balances out itself. That’s why we call it a self-sustaining protocol. I hope you all enjoyed this video and if you did enjoy then please subscribe to the channel and like the video.