Everything you need to know about $COV (Covesting) — The Tokenomics and Theoretical Value Analysis
Tags: Cryptocurrency Investment, Cryptocurrency, Crypto, Bitcoin, Blockchain

Everything you need to know about $COV (Covesting) — The Tokenomics and Theoretical Value Analysis Gemma.B Follow Dec 26 · 14 min read

I’ve been involved in cryptocurrency (mostly Bitcoin) trading since 2016. One of the reasons I liked the idea of trading Bitcoin is because it has price dynamics that are similar to other liquid commodities (such as gold, palladium, silver etc).

However, It’s difficult to do any fundamental research about future Bitcoin price (again, this is similar to commodities) apart from supply/demand analysis and USD dollar money supply and inflation which affects all scrace assets across the board.

Of course, like many, I discovered ICOs and altcoins in mid-2017 and I liked the fact that some projects offered interesting value proposition and often had actual

positive correlation between the token price and health of the DeFi asset / Application / Exchange itself that had built infrastructure around such a token.

Since then, and learning about the different tokens that cover this broad market, I have been on the lookout to find new promising companies to estimate my potential ROI based on tokenomics, as well as calculating the potential price that the token can reach after all token utilities are implemented — or once the company gets into the global growth stage.

The great thing I have found about the blockchain and cryptocurrency space is that there is so much potential and possibility with the technology, and as such, tokens associated with projects building in blockchain are often seen as barometers for success. More than that, they are often seen as measures of the popularity of success of a new blockchain / investing / financial idea that is still limitless due to its future potential.

Finding the Gems

Not many projects survived crypto winter of 2018, in fact only about 10% percent of all projects that raised funds through the ICO mechanism managed to release a viable and functional product. The majority either simply scammed away with raised funds while others developed products that are either completely different from the original vision stated in their white papers, or have no economic use (utility) of the token.

It’s very sad to realize how much of total funds were lost in such schemes. However, that does not detract from successful companies that proved that when business is managed properly, a token has proper use cases — it may provide good reward.

One of the most well known or successful tokens launched, that is still gaining today and finding increased utility, is Binance’s BNB coin the utility token of Binance Exchange which was also an erc20 token.

Users get a discount off trading fees on the exchange if they use BNB to pay. The total supply of BNB is 200 million, with a token burn mechanism that will burn part of the trading fees generated on its platform. BNB’s price has risen from its launch price of $0.10 to a high of $40 before Binance converted it to Binance Chain. It currently still trades for $30. If this isn’t an impressive return, I don’t know what is.

FTX’s Token, FTT, is another example of a successful coin that has shown good growth, especially in terms of its market cap. FTX cryptocurrency derivatives exchange launched in April, 2019 and offers futures and leveraged tokens on both individual and baskets of crypto assets, over-the-counter (OTC) trading.

FTT is the native token designed for the cryptocurrency derivatives exchange FTX. It has numerous uses designed to benefit its users and increase network effects around the platform. It began its market capitalisation journey at $47.4 million but has more than 10x that figure with its current market capitalisation sitting at $476 million.

Another interesting token to look at in terms of return and potential is Tezos. Like Bitcoin and Ethereum, Tezos is a decentralized ledger that makes use of blockchain technology. Like Ethereum, Tezos is designed to make use of smart contracts. The term “Tezos” is ancient Greek for “smart-contract,” according to the developers.

After a promising start and a highly successful Initial ICO, Tezos was troubled by numerous delays and legal issues. However, Tezos survived the cryptocurrency bear market, in part because of its unique proof-of-stake mechanism. The price of tez more than tripled between October 2019 and February 2020 and reached record highs. As of February 2020, Tezos was attracting attention again.

Finally, I have come across Covesting Token (COV), an erc20 token built on the Ethereum Blockchain that is the native token for the Covesting Platform operating on the PrimeXBT Exchange.

Covesting is a copy-trading platform that allows individuals who have no time nor trading expertise to benefit from movements in the market by following or tagging their account to another trader.

The Covesting Token benefits the holders and Covesting Module users in several ways.

For example, strategy managers can reduce their trading fees, followers can activate a specific COV token utility to eliminate entry fees and additionally the percentage split that followers earn from all profitable trades can be increased in favor of followers.

Like BNB, a utility token of a major crypto exchange, COV has many similarities. Token burn, for example, is of material importance to COV because the total supply of the COV token is not large. The total supply of COV token is only 20 million, with its current circulating supply of 18 million. A tokenomics like that of COV has been proven to have a significant impact on its price.

Hence, buying such tokens can be a very profitable investment. If one has missed out on BNB, you do not miss the next token. With similar tokenomics as BNB, COV is one such token that may offer this kind of potential.

In fact, dare I speculate that the potential of COV price upside ROI % wise may be larger than BNB in that COV has far less tokens and Covesting has a larger target market. Binance further does not allow their trader clients earning additional income from letting others copy their trades. Hence, the user growth potential for Covesting can be greater than that of a typical brokerage like Binance.

With time, more users will get onboard to use Covesting, and as more users use COV to pay trading fees, more COV tokens will be burnt, reducing its supply. As more users acquire COV for the benefits that it provides, there may come a time when demand exceeds supply, resulting in an inevitable surge in price.

The weekly chart of COV also shows that a bottom may be in place. Having hit a low of 0.05 in early 2020, price has rebounded 7x and seems to have formed a cup and handle bullish formation.

Other than that, price is also moving in an upward trending trend channel and currently, the area around $0.34, which is the trend channel support, will be a good area to do long entries, as it is also the former resistance turned support, as well as the neckline of the cup and handle.

This support is seeming to hold, as price has rebounded to $0.40 currently. When this retest of the neckline support holds, it should confirm the bullish move with a target of between $0.80 to $1.20, representing a minimum of 250% upside potential.

Looking to the future

I believe that the majority of Top 100 coins don’t have a triple digit ROI potential anymore (like, it’s very unlikely that Binance’s BNB coin will reach a 20bln market cap anytime soon). Instead, I was looking for hidden gems that are still much under the radar but as business — they either close to finish the development and release the product, or they recently released it and already have an actual use case but simply didn’t have enough time yet to gain necessary traction.

In this article I wanted to research about is Covesting — $COV. This is one of few projects that went through the hard times when cryptocurrency prices experienced a rapid drop and demand for crypto related services declined significantly too.

Continuing to develop its product, while cutting (optimizing costs) and shifting its focus towards b2b services, the Covesting team did a great job satisfying most of its promises in original whitepaper and also exceeding those to some extent. I also liked the concept of copy-trading itself too, since the world is shifting towards a p2p environment, and Co-vesting fits well in this megatrend.

Understanding why Covesting is a new Gem

Covesting is a global fintech company incorporated under the laws of Gibraltar, which offers the broadest array of software solutions for retail and institutional customers worldwide. Covesting has become one of the world’s first companies to receive a Distributed Ledger Technology License (DLT) from regulatory authorities in Gibraltar etc.

https://twitter.com/covesting/status/1316784210796056576?lang=en

A look at information from Covesting has shown that some strategies are returning almost 2,000 percent returns on their platform.

Looking at the Covesting team shows an experienced and well versed team in Dmitri Pruglo and Timofej Voronin, both men having experience in traditional finance at Saxo Bank and other investment firms and banks.

Pruglo has over 12 years of experience dealing in various asset classes: FX, options, futures, equity, commodities, complex OTC structured products and bonds. He also has in-depth knowledge of most trading platforms available on the market today and has been involved in the development of several algorithmic trading strategies.

Voronin is an experienced equity and derivatives trader, entrepreneur and early adopter of cryptocurrency. His first engagement with Bitcoin began in 2012 when he first included cryptocurrency in his private portfolio. Voronin began his trading career in 2008 as a prop trader at Argo Traders where he was constantly implementing new trading techniques and grew as a professional, trading on LSE and XETRA during one of the most turbulent times in market history.

Interestingly, Covesting formed a partnership with popular Exchange, PrimeXBT in 2020 that allows the core COV utility token functionality to be implemented on the Covesting copy trading module on PrimeXBT.

PrimeXBT is a Bitcoin-based margin trading platform that offers instant access to over 30+ assets, including Crypto (Bitcoin, Ethereum, Litecoin, Ripple, EOS), Forex, Commodities (Metals, Oil, Gas), and Indices.

The exchange was founded in 2018 and currently serves clients in more than 150 countries. The company has a daily trading volume over $500m. In the 2020 ADVFN International Financial Awards, the company won the award for the best bitcoin Margin Trading platform.

What is COV token

At its core, COV is a utility token of the Covesting Platform which aims to establish partnerships with a number of third-party trading platforms and exchanges to provide a seamless copy-trading experience. Every integration will include COV token utility. COV token will provide multiple incentives such as trading fee discounts as well as additional unique features and benefits.

At the time of writing this article the current market cap for COV, the ERC 20 token built on Ethereum, is $7,478,012 and has a daily trading volume of 41,508.90 in the past 24 hours. Currently, the circulating supply is 18 million out of a total of 20 million.

COV is also currently available on KuCoin, on Uniswap and they are on the lookout for more exchanges to add onto, but there has not been a rush in this space as Covesting have been focusing on the utility rather.

On January 1 of this year the price of the coin was $0.37, and as the year closes out, the price has risen to $0.41.

Covesting has relatively active telegram community where Followers as well as Traders discuss new strategies, market trends and latest platform features.

Check out the Covesting telegram group.

Top holders

Interestingly, looking at Covesting, it has a good distribution among top 100 holders compared to many other projects. This is a positive thing due to the fact that price can’t be easily manipulated and is well distributed, a key factor in the growth and expansion of good cryptocurrencies.

But since the token utility only just launched — volumes are yet to pick up on spot exchanges where this token is being traded. So, it seems that the price is still sensitive to larger orders due to thin order books.

Business model and COV token utilities

Covesting offers attractive incentive schemes for its users who are using COV token and aims to establish partnerships with a number of third-party trading platforms and exchanges to provide a seamless copy-trading experience. For its first partner, PrimeXBT, there are already a good range of utilities on that platform.

The incentive schemes were designed to provide as much utility to the token as possible and decrease the token’s circulating supply. But, Covesting utility must be highly scalable and easily transferable to other third-party trading platforms where the Covesting platform is made available under the white label licensing agreement.

Systematic token burn

Apart from the token utilities that COV offers — the company aims to conduct systematic token burns which are explained above, and are already proved to be an extremely efficient tool to create a deflationary nature.

Interestingly, even with the token utility launch only happening on December 9, 2020 — the company managed to burn 18,6133 COV which is equivalent to $93,066 at the time of writing. It seems that the company has allocated part of collected fees during the platform operation until the token was integrated.

A token burn transaction taking almost 1% of all tokens out of the supply

Summary of COV token utilities

We have already seen how successful exchange tokens like BNB, FTX can be. Even having a single utility — trading fee discount provides an amazing value proposition in case trading volumes gradually increase on such an exchange. The more users visit and trade on such exchanges — the more will use the utility to reduce fees — the more demand for tokens.

Utility exchange tokens have started being recognised as essential to users of exchanges as their benefits are being relied upon rather than just appreciated now. The benefit of having a utility token that has a function is that the more reliance on its function the more value the coin will gain.

Since Covesting aims to partner with multiple trading platforms such as PrimeXBT — it is obvious that with every single partnership like that — usage of COV token will instantly increase multiple times, since they are tapping into existing user base, which will instantly use the product as well as utilities of COV effectively.

COV Tokenomics — Opportunity analysis

Having limited data at hand (that is publicly available) I have tried to calculate the potential (theoretical) COV token burn per month (30 days). Please be aware that this is a theoretical analysis and may not reflect the actual token burn amounts in future. Also, even in the traditional finance world — it’s not uncommon that a stock doesn’t represent the actual fundamental “Book value” price of the share.

So the same may happen in the current case with Covesting. This research and calculations are for experiment purposes only — Don’t take this as financial advice.

In my calculation I will use the following types of data:

- Actual data — this type of data is publicly available and I managed to collect from the Covesting module available on Primexbt website.

- Assumptions — this data is pure assumptions that I have used to calculate different scenarios.

All data used for calculations below has been collected on 09/12/2020.

The Actual data:

Assumptions:

- We assume that every unique follower follows at least 5 different strategies at once. Therefore, we get the number of unique followers 2130 (by dividing 10650 by 3).

- We assume that at least 10% of traders will use the Trading discount utility, which comes to 25 (250 strategies x 0.3)

- We assume that 10% of users (followers) will use the 1% entry fee utility. It makes 213 utility activations, while others will continue using the platform without activating such utility

- We assume that 10% of users (followers) will use the 5% success fee improvement utility, while others will continue using the platform without activating such utility

- We assume that average Covestings average success fee is 15% (max is 20%, while min is 5%) from all profitable trades

- We assume that Covesting will burn 100% of fees collected as per COV utility activations and 35% of all other fees collected w/o utility.

Important! When calculating revenue of the Covesting module from entry fees (1%) as well as platform success — we have used the amount of “$ value of all followings” only once — traders have started their followings at the beginning of month and finished 30 days after. This means that if traders execute multiple followings/unfollowings during the period — the amount of fees (both entry fees and success fees) would be increased. However, I have decided to stick to this pessimistic scenario.

Also it is important to note that current data doesn’t include extremes like we have seen in November, where multiple strategies demonstrated 5000% — 10000% while generating tremendous amounts of success fees for the platform. Also, during the Bitcoin bull run — the percentage of profitable strategies Vs losing strategies was also higher, again, resulting in higher amounts of fees collected by the platform.

As you can see, once we include all available data and assumptions described above — we come up with a monthly token burn of 226,952 COV.

Now let’s look at the growth statistics. PrimeXBT grows about 20% month on month, which means that the number of Covesting module users should also grow at roughly the same pace.

If we keep all assumptions and figures at the same respective ratio as we used for the calculations above — we come up with the following token burn scenario.

Month 1: 226952 COV

Month 2: 226952 COV x 1.2 = 272342 COV

Month 3: 326810 COV

Month 4: 392172 COV

Month 5: 470606 COV

Month 6: 564728 COV

If such token burns will remain consistent — there is no doubt that it will have positive effect on COV token price itself.

Conclusion

This is an experimental calculation made based on publicly available data. The actual figures are only known to Covesting and PrimeXBT. Taking into account that covesting aims to establish new partnerships similar to the one with PrimeXBT, and will keep up with a consistent burn program — I believe that the future for COV token is extremely bright.

My personal preferred options for buying COV token are:

Kucoin

https://trade.kucoin.com/COV-BTC

Uniswap https://info.uniswap.org/pair/0x3098dA7aB4F8Ef73659a750E2F61cdDCEFdA21c2

This is not financial advice. Kindly do your own research prior to making any investment decisions.

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