Telegram’s much-anticipated cryptocurrency could achieve a $200 billion market cap in five years, but a respected analyst said that the firm’s initial coin offering (ICO) is still probably overvalued.
Reports on Telegram’s goal for the ICO have varied wildly. Some have placed the figure as high as $2.6 billion, but all reports agree it will likely shatter the token sale record.
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Aaron Brown, a former managing director at quantitative investment firm AQR Capital Management — told Bloomberg that Gram, the native token of the Telegram Open Network (TON), could achieve a $200 billion market cap in as little as five years, netting ICO investors significant profits.
However, the stars must align for investors to see that windfall.
Brown anticipates that 300 million people will be using cryptocurrencies in five years — raising their aggregate market cap to $5 trillion — and that Telegram could attract four percent of them to its platform.
Assuming that Telegram’s platforms sees a similar ratio of transaction balances to annual revenue as the now-defunct dark web marketplace Silk Road (one-sixth), Gram’s market cap will reach $200 billion. This, though, would require users to average $100,000 of annual value exchange, an eye-popping figure given current cryptocurrency transaction volumes.
“This would make it roughly one-third the size of giant internet companies, which is consistent with my estimate that crypto will be one-third the value of internet businesses,” Brown told the publication, stressing that this forecast is an absolute best-case scenario. “But that is the good case, and there are a lot of uncertainties about reaching it.”
Brown said that, according to his best estimates, Gram should launch with a $1 billion valuation (the article does not make clear whether this figure refers to the cryptocurrency as a whole or just the tokens distributed through the ICO).
“When I adjust for the other plausible cases and general crypto valuations, I came up with numbers like $1 billion, and declined to participate (I had reasons other than the price),” he said.
$1 billion is still an impressive mark for a cryptocurrency to reach at launch, but it nevertheless indicates that investors — mesmerized either by the token sale’s notoriety or the claims that Telegram makes in the TON whitepaper — are perhaps paying a significant premium for access to the ICO.