Research from Quam Securities, Quam Securities

Quam Securities Research

Research from Quam Securities

Quam Securities

Since its inception in 1986, Quam Securities Limited (Quam Securities) has grown to become one of the few mid-tier securities brokerages in Hong Kong with global execution capabilities for both private and institutional clients. It boasts a well-established network in Greater China including Taiwan and in major world markets through the Global Alliance Partners (GAP). Quam Securities is well-positioned not only to harness and drive business within the China Tonghai International Financial Limited but also between China and the world markets.

Crypto

<p>ABCDE Sector Weekly provides market-moving insights and news for the rapidly transforming digital asset sector with a primary emphasis on their impact on related equities.  More importantly, we keep equity investors informed on how they can invest on the right side of change.   </p>

ABCDE Sector Weekly provides market-moving insights and news for the rapidly transforming digital asset sector with a primary emphasis on their impact on related equities.  More importantly, we keep equity investors informed on how they can invest on the right side of change.   

<h3>Stock Picks</h3>
<p><strong>Coinbase (COIN US) – Growing by leaps and bounds; Initiate with Buy, TP: US$302.62<br></strong>We initiate coverage of Coinbase Global (Coinbase) with a Buy rating and 12-month SOTP-derived target price of US$302.62. As one of the largest digital asset trading platforms with a broad suite of value-added services, we believe Coinbase will benefit from the expanding TAM of the cryptoeconomy, which will drive revenue and user growth. We see current valuations (17.2x 2022E P/E) as attractive relative to its robust growth profile and leading position in the digital asset industry.</p>
<p><strong>BC Tech Group (863 HK) – Pushing the envelope in institutional digital asset; Initiate with Buy; TP: HK$18.53<br></strong>We believe BCG’s shares offer investors exposure to the structural theme of rising institutional demand for digital assets trading and investment solutions. As one of the few publicly listed and licensed players in the digital asset exchange industry, we expect BCG to benefit from strong revenue growth and earnings breakeven in 2022E. We view current valuations (7.6x 2022E P/S) as attractive relative to its regional and global peers, given its robust revenue growth.</p>
<h3>Where we differ</h3>
<p>Sell-side research has been focused narrowly on margin compression and intensifying competition from other exchanges.  Our view is that focusing any discussion of licensed and regulatory compliant digital asset exchanges on commission and margin pressure is overly limiting. Instead, we urge equity investors to take a broader view. In other words, investing in pick and shovel plays will give investors exposure to the future potential of the digital asset phenomenon.</p>

Stock Picks
Coinbase (COIN US) – Growing by leaps and bounds; Initiate with Buy, TP: US$302.62 We initiate coverage of Coinbase Global (Coinbase) with a Buy rating and 12-month SOTP-derived target price of US$302.62. As one of the largest digital asset trading platforms with a broad suite of value-added services, we believe Coinbase will benefit from the expanding TAM of the cryptoeconomy, which will drive revenue and user growth. We see current valuations (17.2x 2022E P/E) as attractive relative to its robust growth profile and leading position in the digital asset industry.
BC Tech Group (863 HK) – Pushing the envelope in institutional digital asset; Initiate with Buy; TP: HK$18.53 We believe BCG’s shares offer investors exposure to the structural theme of rising institutional demand for digital assets trading and investment solutions. As one of the few publicly listed and licensed players in the digital asset exchange industry, we expect BCG to benefit from strong revenue growth and earnings breakeven in 2022E. We view current valuations (7.6x 2022E P/S) as attractive relative to its regional and global peers, given its robust revenue growth.
Where we differ
Sell-side research has been focused narrowly on margin compression and intensifying competition from other exchanges.  Our view is that focusing any discussion of licensed and regulatory compliant digital asset exchanges on commission and margin pressure is overly limiting. Instead, we urge equity investors to take a broader view. In other words, investing in pick and shovel plays will give investors exposure to the future potential of the digital asset phenomenon.

Corporate Access: BC Tech Group & Coinbase Coverage

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<h2>The Ethereum Blockchain: First Mover That Transformed the Blockchain</h2>
<p>The Ethereum blockchain was launched in 2015 and is built on the decentralised and distributed architecture present in Bitcoin. Ethereum uses smart contracts which can be interconnected to interact with each other and hence create an operational platform.</p>
<p>The significance of the Ethereum platform is that it allows users to build applications running on the blockchain, similar to software running on a computer. Through running smart contracts on Ethereum Virtual Machine (EVM), mass consumption of decentralised apps is made possible.</p>
<p>Given that Ethereum is a decentralised network, clients will have the benefit of control over their data, with no central governing authority. Ethereum is a permission-free, public blockchain platform whereby all transactions recorded on it are visible and accessible by everyone. The blockchain uses a Proof of Work (PoW) consensus mechanism according to which all nodes need to agree on a ledger to access the entries recorded in the network.</p>
<p>The key benefit of Ethereum when compared with other blockchains is that it has a large network which has been tested through years of operation and billions of trading value. For instance, in the early part of 2020, the total value of cryptocurrencies invested in Ethereum smart contracts exceeded US$ 10bn.</p>
<p>However, on the other hand, due to this growing popularity, Ethereum transaction (gas) fees reached a record US$ 23 per transaction in February 2021. Previously, for most of 2020, gas fees were around US$ 2. Although gas fees hit a high of US$ 61.74 in May 2021, transaction fees had declined to reasonable levels in the subsequent month of June 2021 at an average of around US$ 2.15. However, the decline in gas prices is indicative of the decline in demand for Ethereum (the cryptocurrency).</p>
<div style="text-align: center;" class="content-caption"><em>Ethereum Average Transaction Fee</em></div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/220/956/original/image_2596682691627536245896.png?1627536246" class="editor-image img-responsive" data-smartkarma-image-id="220956"></figure>
<div style="text-align: left;" class="content-caption"><em>Source: ycharts</em></div>
<p>Another key issue is that the growing demand has caused slower processing times whereby processing times are much slower than those of newer blockchains.</p>
<p>Ethereum’s open-ended and open-source nature has led to the creation of numerous dApps on the blockchain. In this report, we will be discussing some dApps which run on the Ethereum blockchain and how each of these have responded to the issues of high transaction fees and slow processing times on the blockchain.</p>
<p>These dApps and the sidechains that have evolved to support greater functionality for them create interesting new possibilities which we believe are currently underappreciated. In particular, we believe investor attention is too focused on what blockchains can currently enable rather than the overall direction in which blockchain technology is evolving. This is because despite the massive media attention on crypto and blockchain, the technology itself remains at the early stages of its development and deployment and thus many of the critical limitations it faces could be solved in time. It is thus more pertinent, we feel, to examine what some of these early dApps are trying to accomplish and some of the future possibilities that they hint at.</p>

The Ethereum Blockchain: First Mover That Transformed the Blockchain
The Ethereum blockchain was launched in 2015 and is built on the decentralised and distributed architecture present in Bitcoin. Ethereum uses smart contracts which can be interconnected to interact with each other and hence create an operational platform.
The significance of the Ethereum platform is that it allows users to build applications running on the blockchain, similar to software running on a computer. Through running smart contracts on Ethereum Virtual Machine (EVM), mass consumption of decentralised apps is made possible.
Given that Ethereum is a decentralised network, clients will have the benefit of control over their data, with no central governing authority. Ethereum is a permission-free, public blockchain platform whereby all transactions recorded on it are visible and accessible by everyone. The blockchain uses a Proof of Work (PoW) consensus mechanism according to which all nodes need to agree on a ledger to access the entries recorded in the network.
The key benefit of Ethereum when compared with other blockchains is that it has a large network which has been tested through years of operation and billions of trading value. For instance, in the early part of 2020, the total value of cryptocurrencies invested in Ethereum smart contracts exceeded US$ 10bn.
However, on the other hand, due to this growing popularity, Ethereum transaction (gas) fees reached a record US$ 23 per transaction in February 2021. Previously, for most of 2020, gas fees were around US$ 2. Although gas fees hit a high of US$ 61.74 in May 2021, transaction fees had declined to reasonable levels in the subsequent month of June 2021 at an average of around US$ 2.15. However, the decline in gas prices is indicative of the decline in demand for Ethereum (the cryptocurrency).
Ethereum Average Transaction Fee

Source: ycharts
Another key issue is that the growing demand has caused slower processing times whereby processing times are much slower than those of newer blockchains.
Ethereum’s open-ended and open-source nature has led to the creation of numerous dApps on the blockchain. In this report, we will be discussing some dApps which run on the Ethereum blockchain and how each of these have responded to the issues of high transaction fees and slow processing times on the blockchain.
These dApps and the sidechains that have evolved to support greater functionality for them create interesting new possibilities which we believe are currently underappreciated. In particular, we believe investor attention is too focused on what blockchains can currently enable rather than the overall direction in which blockchain technology is evolving. This is because despite the massive media attention on crypto and blockchain, the technology itself remains at the early stages of its development and deployment and thus many of the critical limitations it faces could be solved in time. It is thus more pertinent, we feel, to examine what some of these early dApps are trying to accomplish and some of the future possibilities that they hint at.

The Potential of DApps to Disrupt Ownership Rights for Digital Assets and Content

Founder, Shrimpy

Michael McCarty

Founder

Shrimpy

Shrimpy develops the most advanced APIs for crypto exchange management, trade execution, and real-time data collection.

Develops the Most Advanced APIs

<p>Welcome to the 17th edition of Shrimpy’s weekly newsletter, a place for staying up to date on the latest trends, news, and events in the cryptocurrency industry. Digital assets evolve and move faster compared to any other market. For those who do not have time to constantly scroll Crypto Twitter, we wrote a special weekly update covering everything major that happened this week.</p>

Welcome to the 17th edition of Shrimpy’s weekly newsletter, a place for staying up to date on the latest trends, news, and events in the cryptocurrency industry. Digital assets evolve and move faster compared to any other market. For those who do not have time to constantly scroll Crypto Twitter, we wrote a special weekly update covering everything major that happened this week.

Amid a Sharp Fall the Crypto Sector Expands as Coinbase and Huobi Join New Markets

<p>Welcome to the 14th edition of Shrimpy’s weekly newsletter, a place for staying up to date on the latest trends, news, and events in the cryptocurrency industry. Digital assets evolve and move faster compared to any other market. For those who do not have time to constantly scroll Crypto Twitter, we wrote a special weekly update covering everything major that happened this week.</p>

Welcome to the 14th edition of Shrimpy’s weekly newsletter, a place for staying up to date on the latest trends, news, and events in the cryptocurrency industry. Digital assets evolve and move faster compared to any other market. For those who do not have time to constantly scroll Crypto Twitter, we wrote a special weekly update covering everything major that happened this week.

2021 Is Back on Track for Being the Year of CBDCs

United States

Ethereum is an open-source, public, blockchain-based distributed computing platform featuring smart contract (scripting) functionality. It provides a decentralized Turing-complete virtual machine, the Ethereum Virtual Machine (EVM), which can execute scripts using an international network of public nodes. Ethereum also provides a cryptocurrency token called "ether", which can be transferred between accounts and used to compensate participant nodes for computations performed. "Gas", an internal transaction pricing mechanism, is used to mitigate spam and allocate resources on the network.

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Ethereum (XETUSD CURNCY)

CTS Research: Digital Asset Thematic

Initiate COIN and BC Tech Group (863 HK) with Buy | Sign up for BC Tech Group NDR 20/8 | US infra bill passage; Poly Hack; Tencent NFT

Quam Securities

Corporate Access: BC Tech Group & Coinbase Coverage

We published a thematic sector report on Digital Asset Exchanges and initiated coverage on the Global Digital Exchange Sector with Buy ratings on...

Quam Securities

The Potential of DApps to Disrupt Ownership Rights for Digital Assets and Content

dApps represent the potential for a breakthrough use case of blockchain in everyday life by transforming the nature of digital asset and media...

Mio Kato

Amid a Sharp Fall the Crypto Sector Expands as Coinbase and Huobi Join New Markets

Welcome to the 17th edition of Shrimpy’s weekly newsletter, a place for staying up to date on the latest trends, news, and events in the...

Michael McCarty

2021 Is Back on Track for Being the Year of CBDCs

Welcome to the 14th edition of Shrimpy’s weekly newsletter, a place for staying up to date on the latest trends, news, and events in the...

Michael McCarty

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