Conversation

4) It's SPACing at $9B, so that means $3B is the exchange if you value the crypto at market prices. So, what _should_ Bullish, the exchange, be worth?

112

Bullish (@Bullish) / Twitter

5) Well, they have a website, and a Twitter, but neither of those are going to help much: bullish.com

twitter.com

Built for institutions and now widely available to users in 40+ jurisdictions. #Bullish

101

6) As I understand it, Bullish is basically: a) build a centralized crypto exchange b) Require KYC c) write trades etc. to EOS blockchain c) have an AMM that provides on the exchange with the $6b of crypto Bullish owns d) let users provide in the AMM too (it's not live yet)

142

7) So basically, Bullish going to is a standard exchange, except that it'll use it's $6b of capital to provide a bunch of liquidity. Is that worth $3B? You can be the judge of that.

141

8) What about that liquidity providing? Well let's dive into an example. They have ~$5B of BTC on hand, and ~$1B of cash. Let's say they raise more and end up putting $1B each of USD and BTC in a BTC/USD pool, using x*y=k. Then, the pool has ~$5m offered within 1%.

Cryptocurrency Derivatives Exchange

9) Right now, ftx.com/trade/BTC-PERP has roughly 900 BTC offered within 1%, or about $30m. So while the Bullish treasury will help with liquidity, it won't be enough to make it top tier. How much will that providing cost in IL?

ftx.com

FTX

106

10) They're assuming 75% annualized BTC volatility, which isn't crazy. If BTC goes up 75% this year, ignoring fees/spreads: Without providing: $1B USD, $1.75B BTC = $2.75B With providing/IL: $1.32 USD, $1.32B BTC = $2.64B So it's paying ~$100m/year to get 20% of FTX's depth

103

11) Which means paying $500m/year in impermanent loss to get top tier liquidity for BTC/USD. Maybe $1B/year for all their books combined. That's..... a lot to pay.

167

12) Which is just a way of saying that, usually, exchanges don't scale up liquidity by just putting out never-moving scales with their internal capital. Ok, so what's up with Bullish's "illustrative" P&L? (from sec.report/Document/00011)

2:37 AM · Jul 10, 2021Twitter Web App

13) Well, basically, they're: (a) ignoring IL (b) assuming that customers are paying 16bps to trade (c) assuming $1b/day of volume (d) assuming they have $2.5B of USD to provide with (for BTC/USD--and more for others) Wouldn't we all love to have those!

Replying to

14) Also, just for fun, here's a chart of competitors' 2023 EV/EBITDA. I love these charts! Though somehow they bury the lede: if I knew every company's 2023 EBITDA, I would go bet on stock and crypto prices, not think of relative exchange valuations.

105

15) But anyway, maybe this is all besides the point. Bullish seems to be comparing itself to Bakkt and Coinbase, but maybe that's not really what it is. Maybe Bullish is really another MicroStrategy.

134