ICO Analysis: Coinvest

As more and more asset managers begin to allocate a portion of their portfolio to cryptocurrencies, they’ll be seeking risk-adjusted returns from a diversified basket of tokens. However, the current index funds that are available may not be what they are looking for. This is because many asset managers are constrained by mandates and risk-controls, so the current landscape of index fund offerings may not be suitable for their given parameters.

Looking to capitalize on this emerging problem, Coinvest is creating a platform that allows both asset managers and individuals to create customized index funds. Additionally, the company is creating a single-token trading system that allows users to trade a variety of cryptocurrencies through a single token.

Token

The Coinvest token (COIN) will be implemented using the Ethereum ERC20. COIN holders generate value from the token as a “unit of account, record of investment, means of exchange, network access token, and store of value” on the Coinvest platform. With COIN tokens, holders can: buy and sell cryptonized assets, create an index fund, edit and rebalance that index fund, and close that index fund.

According to the white paper, 50% of the funds raised will go towards the company’s secondary reserve (a supply of unused cryptonized assets), 30% towards development, 10% towards marketing, and the remainder of the pot (10%) towards operations, administrative, and legal.

COIN tokens are valued at US$700 per 1,100 COIN. A hard cap of US$30 million is in place for the crowdsale.

The company intends to launch an exchange that will “support the purchase of COIN with fiat currency” directly through the Coinvest platform.

Team

Coinvest’s core team consists of two IT veterans, three senior professionals and seven engineers/developers. As compared with the majority of ICOs, Coinvest has a solid tech team that is well above average.

The company’s CEO, Damon Nam, was previously a 16 year IT services veteran at tech-behemoth Microsoft. Damon was most recently Microsoft’s US Services Partner Program Director, in which he managed approximately 75 partnerships translating to a total book of business over $90 million in revenue. The company’s technology director, Byron Levels, has over two decades of experience in the IT sector and has worked for companies such as: Microsoft, AT&T and American Airlines.

The company’s advisory board consists of two heavyweights: Tony Scott and Peter Cashmore. Tony has been the CIO of VMware, Microsoft and the Walt Disney Company. Additionally, he served as the third US Federal Chief Information Officer. Peter is the founder and CEO of Mashable – a global, multi-platform media and entertainment company.

Verdict

Coinvest presents a highly speculative buying opportunity for investors interested in long-term capital appreciation.  

The premise of being able to create a customized crypto index fund through one coin is compelling. Indexes typically have higher risk-adjusted returns than sole investments in individual assets (in this case, individual cryptocurrencies). This is because index funds create broader market exposure that allows investors to diversify risk – this is strongly needed since cryptocurrencies are highly volatile.

Additionally, Coinvest’s platform creates an ease-of-use for trading activity by simplifying the buy and sell orders of various cryptocurrencies. By using one token to trade various cryptocurrencies, users can centrally manage and track their P&L statements in real-time. With over 1,300 cryptocurrencies currently in the market (and growing), a single-token system to trade is becoming near-term a necessity.

Risks

Cybersecurity is the biggest risk to a new exchange. Cryptocurrency exchanges around the world have been subject to a myriad of hacking and fraud attacks. Poor security and lack of investor protection could mean millions of dollars in lost cryptocurrencies if hackers targeted the company. -2

Technological dysfunction could lead to network latency issues that hamper the profitability of trading. During the initial stages of Coinvest’s launch, low-latency will likely not exist. Therefore, traders will incur additional transaction costs than what is currently being marketed. -0.5

Coinvest’s core team has a lack of capital markets experience – lack of domain expertise could lead to a variety of functional issues. Beyond latency issues, traders will also have counterparty risk in the form of a) faulty software and b) misappropriation of funds. -0.5

Growth Opportunities

Scale in user base growth would have a positive effect on the price of COIN – the primary metric for tracking growth would be daily active users (DAUs). As DAUs and retention increases, the rising demand for COIN (coupled with a relatively fixed supply) would equate to upward price pressure on the token. +4

Increases in the frequency of trading would also have a positive effect on the price of COIN. As cryptocurrencies continue to go mainstream and adopt more users that actively trade, COIN will be a significant beneficiary. The ease of using one coin to trade multiple cryptocurrencies will likely be attractive to a large volume of future adopters. +3

Coinvest offer the ability to create customized index funds – this will likely be a strong selling point for the asset management industry. Wealth managers will be able to create an index (basket of cryptocurrencies) to trade on behalf of clients that meets their exact needs (risk tolerance profile). Institutional investors will also be able to hold diversified positions in cryptocurrencies using Coinvest’s platform without the need to hold each token directly (thereby reducing downside risk and liquidity traps). +3

Disposition

While Coinvest has some risks that need to be addressed (particularly: cybersecurity and transaction costs), the vision for the company is strong and focused. The company’s vision of creating a single-token platform that’s capable of trading a basket of cryptocurrencies is highly useful and needed. While there are already other companies that offer index funds, Coinvest’s value proposition is that any individual or asset manager could create a customized index fund – they get to choose which tokens they have exposure to.

As the cryptocurrency market continues to grow, more efficient means (a sing-token platform) to trade a variety of tokens will become a necessity. Even though Coinvest has yet to launch their platform, the product they offer will be highly valuable (provided they can fully develop the technology and execute their plans).

Against this backdrop, we believe that a score of 7 out of 10 is warranted.

Investment Details:

  • Type: Crowdsale
  • Symbol: COIN
  • Pre-Sale: January 2018
  • Public Sale: Q1 2018
  • Payments Accepted: ETH

Disclaimer: no position in Coinvest at the time of writing.

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