Investment Thesis
Exchange tokens have been amongst the highest performing and least risky crypto investments in recent years, delivering a median return of 9.4x with only 7% failing to appreciate beyond launch price. GlobeDX is a next generation, low latency exchange with compelling reasons for market fit and adoption - most notably new innovations such as the industry first offering of e-sports futures, tapping into a market of over 270m e-sports viewers,1 arguably the biggest draw to a crypto derivatives platform since FTX’s presidential contracts. The native token, GDT, has clear value props, including fee discounts, staking rewards and the ability to be used as collateral; the use cases and tokenomics are quite similar to FTT which has yielded a 36.9x return to date.
Project Details
Ticker: GDT
Price: $0.80* (Public Sale Price TBA)
Market Cap: $7,600,000*
Fully Diluted Market Cap: $320,000,000*
Circulating Supply: 9,500,000
Maximum Supply: 400,000,000
*based on private sale
Key Takeaways
First low latency derivatives exchange
No internal trading desk, insured cold storage, easy to use API
Several industry first offerings including sports & e-sports future, global real estate perpetuals, DeFi integrations, pre-ICO trading and more
Unique giveaways, including socially driven BTC puzzles and NFT’s, and incentives to attract new users
Clear token use-case, similar to FTT value props and tokenomics which inherently drives a strong demand-supply dynamic
Team has extensive quant and high-frequency trading experience, developers have strong backgrounds in relevant areas; however, there are a few concerns
Delivered a working test net exchange with main net launching late Q1/Q2, therefore little to no concern of failure to deliver
Recently received $3M in funding from Y Combinator, Pantera Capital, Draper Dragon, Wave, Capital Energy and Pascal Capital
Exchange tokens have performed incredibly well in recent years and significant downside is unlikely
Exchange Overview
Globe (globedx.com) is a next generation cryptocurrency derivatives exchange which claims to be the first no-lag platform open to the public with a reported 3 microsecond latency. Learning from limitations of existing exchanges, Globe leverages a unique exchange architecture where the matching and risk engines run in colocation and the order book is kept in L3 cache. Furthermore, Globe does not have an internal trading desk, offers insured cold storage and offers an easy to use WebSocket API. Lastly, for the high-leverage-inclined Globe has joined the list of exchanges offering 100x leverage perpetual contracts.
Globe started in March 2019, though the concept was likely spun up earlier as the core team all worked together prior. The project received an additional $3M in capital from Y Combinator, Pantera, Draper Dragon, Wave, CapitalEnergy and Pascal Capital in November 2020.
The exchange is currently operating as a functional test net, and although there is no confirmed official launch date it is expected to be late Q1/Q2 and the platform is currently open for registrations. There are a number of initiatives underway to generate interest and drive sign-ups including “The Billion Satoshi Puzzle” which is a picture with up to 10 BTC hidden inside and offers a share of up to 20% to anyone in the retweet chain that leads to the eventual winner, a compelling case to drive social interest. In addition to this, they are offering a draw for XBT and are leveraging the NFT hype with a giveaway of 13 NFT’s (which grant yet to be announced benefits on Globe) for users who register prior to February 26th. These existing efforts are clearly working as the Globe Twitter has attracted over 12k followers. Once the exchange officially launches, a rewards program will be launched where users can be entered to win XBT for completing tasks on the platform and an affiliate program will kick off.
Competitive Landscape & Market Fit
The cryptocurrency exchange space has no shortage of competitors, but it’s clear that there is a path for innovators to rise to the top: Binance, currently the largest exchange by volume, was relatively obscure during the last bull market, and FTX launched in May 2019 and now ranks 4th amongst all exchanges.
Globe could find success simply from living up to it’s no lag claims - exchange outages and delays have been a pain point for crypto traders for years, and Bybit effectively rose to 6th amongst all exchanges by positioning itself as a Bitmex alternative with less lag and downtime. Also, although a smaller audience segment, the lack of serious API support offered by most exchanges may drive some users to Globe. They also offer 100x leverage to attract the true degenerates, though this certainly isn’t an offering unique to them.
However, where Globe is likely to make a mark in the exchange realm is by taking the FTX path of innovative offerings. FTX’s perpetual index offerings, such as the DeFi index and the infamous Shit index, as well as Move contracts, were really what first put FTX on the map of crypto traders and investors. Globe will put itself on the map by offering a number of firsts in the crypto industry including BTC VIX perpetuals, global real estate perpetual indices, DeFi integrations, pre-ICO trading, and possibly most importantly, sports and e-sports futures. This latter offering could attract the attention of over 270m e-sports viewers1 and major events could draw traffic similar to the presidential elections contracts on FTX which accounted for 22% of all traffic to the site at the time.
These innovative offerings are one of the largest competitive differentiators for Globe and it will be important for the team to deliver these while it is still an industry first - competitors can copy, like Binance did with DeFi indexes, but it’s hard to know if FTX would be in the same position they are in today if they were not first to market with DeFi perpetuals. That being said, it’s not unrealistic for Globe to find a market fit simply by offering a no lag trading experience with attractive, liquid trading pairs. It’s already clear they will prioritize hot newer listings as they have foregone the staple BCH and LTC starting package and opted for UNI, which is currently on test net, with plans for MKR, COMP, AAVE and CRV to be added.
Team
The Globe team largely all worked together at Fifth Row Technologies, a London-based research and development laboratory researching low latency technologies. Most of the team has a background in trading and it’s an encouraging sign that the team has worked together for several years and that the work they did prior to launching Globe was focusing on low latency tech; however, there are a few concerns to note. First, the CTO (who was also the CTO of Fifth Row) does not appear to have the extensive work experience, at least publicly shared, that would be expected of a CTO role. A second, related concern, is that the CEO and CTO were college roommates - there’s nothing inherently wrong with this, but coupled with a lack of experience it is worth noting. The third, and last concern is that although most of the development team has extensive experience, many of them have bounced from project to project on short-term contracts prior to landing at Fifth Row. The following is a brief overview of the main team members.
James West, CEO - Spent four years as Head of Quant at Grove Capital Management and is the CEO at Fifth Row Technologies. He has a PhD in statistics with over 700 citations.
Shaun Ng, CTO - CTO for Fifth Row Technologies, former trader focused on arbitrage and automated machine learning trading models. Did a brief stint as a freelance developer but otherwise no listed experience in formal technical roles. Holds Masters in both Investment & Risk Finance and Astrophysics.
Richard Matheson, Exchange Engineer - Has 12+ years experience building enterprise software, most notably for Thomson Reuters.
Peter Hall, Exchange Engineer - Rust contributor, has 10+ years experience across UBS, Fidelity and Algomi.
Vasilica Puica, Frontend Lead - 10+ years experience in frontend development, though this has been primarily contract work spanning 13 different companies.
Diep Le, Cloud Architect - Has over 18 years experience in Dev Ops and Software Engineering, formerly focused on cloud infrastructure scaling at Rackspace, eBay, Travelex and others, though all were on a contract basis.
Sam Holt, Data Scientist - Authored a deep learning textbook, was a research intern at Oxford Machine Learning Research Group and had a brief stint as CTO of a crypto arbitrage fund. Has a Masters in Engineering Science from Oxford.
Rob Jones, Low Latency - 26+ years of experience as software developer for IBM, Lucent, Tektronix, HP and Morgan Stanley. Built high frequency trading systems at Getco and is a C++/boost contributor.
Pat Butkowinski, Low Latency - 10+ years experience working on eFX exchanges across JP Morgan & BAML.
Tokenomics & Use Case
Circulating Supply 9,500,000
Maximum Supply 400,000,000
Final Supply 200,000,000*
Seed Price $0.15
Strategic Price $0.40
Private Sale Price $0.80
Public Sale Price TBD
*After 50% of supply burned
Globe’s native token, the Globe Derivative Token (GDT), has a number of use cases, most of them adopted from BNB and FTT. GDT can be used to provide fee discounts - $100 in GDT results in a 5% discount, $1,000 for 10%, $10,000 for 20%, $100,000 for 30%, and $1,000,000 for 40%. GDT can also be used to pay trading fees, though it has not been confirmed if this would work like BNB where if GDT was used to pay fees, it would be at a reduced rate. Globe also borrows one other thing from the FTT playbook, enabling GDT to be used as margin for trading. In addition, GDT is bought back and burned at a rate equalling 30% of trading fees and 10% of all other fees, until 50% of all GDT is burned. These token use cases in combination with an active buy and burn mechanism create a powerful supply and demand relationship that has fuelled the rise of other exchange tokens like BNB and FTT.
However, one use case that has not been promised at this time is access to IEO’s which may lead to slightly lower demand than has been seen with these other comparables.
One feature which is unique to GDT is related to the Globe Rewards system. Every two weeks, Globe distributes prizes in the form of XBT to 40% of users that have entered at least one ticket - these tickets can be gained by completing tasks on Globe, such as making a deposit or sharing referral links. GDT holders are able to stake their GDT in order to receive a Globe Rewards Boost and receive more tickets for the fortnightly draws. Details remain limited, but the team has said there will also be incentives around insurance fund staking and other staking rewards are likely to be unveiled.
The majority of GDT is either held by the company, or reserved for user acquisition, the insurance fund and ecosystem, so selling pressure shouldn't be too extreme, though it will be worth keeping an eye on Team funds once unlocked. The majority of team and presale funds are locked until 8 months after main-net launch, so again I don't envision strong sell pressure in the early days. Seeing how token price reacts after larger unlocking will be telling.
Overall, GDT has borrowed largely from two of the most successful token models in the exchange space and should do relatively well as a result. The Globe Rewards Boost and other potential staking rewards are not detailed enough at this time to determine whether this use case is as valuable to token holders as the IEO-access was for BNB and FTT, though at this stage it seems unlikely which may slightly hinder upside. No major unlocks occur until the 8 month mark so public sale participants should not have to be too concerned about early sell pressure, though there will inevitably be some as any project with cheaper seed rounds.
Exchange Token Performance
Centralized exchange (CEX) tokens have been one of the strongest sectors to invest within the cryptocurrency space, offering stellar returns and in most cases, little to no downside. Below is a sample of 15 CEX tokens launched in recent years - this is not an exhaustive list, but covers a large majority of tokens launched in recent years and includes a sample of both the best and worst performing tokens.
Note: BNB, to an extent, is an outlier in the following list given the magnitude of the returns relative to the other tokens on this list, and therefore when referring to average returns since launch, BNB will be omitted.
The above CEX tokens had an average return of 2,339% from launch to peak and on a buy and hold basis the returns are 1,392%. Only one token, BXY, has failed to post positive returns since launch and 67% of the sampled tokens are positive on a buy and hold basis. Even if all of the top 5 performers - BNB, OKB, KCS, BTMX and FTT - were excluded, this sample would still yield 507% returns from launch to peak and 166% on a buy and hold basis. The main takeaway here is that CEX tokens, on aggregate, have been an investment that can’t miss.
Decentralized exchanges (DEX) such as Uniswap and Sushi have stormed onto the scene in the last year and have taken a bit of the shine of CEX’s. However, CEX tokens have still performed tremendously in spite of this as seen here.
Only a single token - BTSE - has posted negative returns in the last 30 day, 90, 120, 150, or 180 period. Every other token in this sample has yielded positive returns regardless of 30 day or 180 day holding period. Part of recent performance is driven by the BNB run and the increase in Ethereum fees, but that discounts the growth in prior months which is actually higher than during the BNB-led run.
Therefore, not only do CEX tokens offer historically strong risk/reward opportunities, GDT will be launching on the backdrop of strong CEX token performance.
GDT vs. FTT
FTT is clearly the strongest parallel for GDT - the token mechanisms are quite similar and the strongest differentiator argument for Globe aligns with what put FTX on the radar of so many users. Therefore, FTT will be used as a proxy for projecting potential future valuations of GDT.
Note: public sale pricing is not currently available for GDT - this comparison will be updated when available, but for now defaults to private sale with a speculated 50% increase for public sale as reference.
At current pricing, GDT is raising 38% of what FTX did at the time of the FTT public offering, and even at speculated public pricing, it still aims to raise 57% of the equivalent FTT raise, and during a strong bull market nonetheless. However, it’s worth considering that the FDV for Globe is significantly higher and that FTX was averaging $100M in daily volume at the time of the token offering, good for a slot amongst the top 30 cryptocurrency exchanges, as opposed to running on testnet. That being said, given the state of the market and the extensive promotions it is not unreasonable to expect GDT to outperform FTT early on.
Unfortunately, Globe has not yet officially launched and therefore it’s difficult to project volume and user base. Making the optimistic assumptions that Globe follows a parallel growth path to FTX and unlocks supply in a similar manner, the comparable value of GDT one year post-launch would be $25.73 per token, a return of 32x for private sale participants. Given the market share already captured by FTX at the time of offering, the difference in burn rates, and the unknown impact of the Globe Rewards offerings relative to the known impact of FTT IEO’s, this should be deemed as a best case scenario comparable. However, regardless of the level of optimism applied, the outlook for GDT is extremely promising given the FTT comparison and the history of CEX token performance.
Conclusion
CEX token offerings are about as close to can't miss as it gets in crypto and GlobeDX has a number of compelling reasons to become a real player in the crypto exchange space. FTT is the clearest comparable in terms of both tokenomics and market fit, and if GDT were to follow a similar path it's not out of the realm of reason that GDT could 20x over the next 12 months.
Want to partake in the GlobeDX (GDT) public sale? Head over to globedx.com and register to participate on May 3rd!
References
1. http://www.sportingpedia.com/2021/01/21/esports-betting-industry-size-and-expected-growth/
2. https://www.coindesk.com/ftx-presidential-election-prediction-markets-record-volume-trump-biden
All information not otherwise directly cited is from globedx.com or Globe promotional material
Crypto Advocate participated in the GlobeDX private sale.
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