Editor’s Note: This article was updated on May 10 to correct the author’s holdings.
BitTorrent (CCC:BTT-USD) had a terrible reputation in the past with movie studios. The “decentralized” peer-to-peer sharing protocol has been around for a long time. It was used mainly to download movies before Netflix (NASDAQ:NFLX) and video streaming took off. Since then, BitTorrent has undergone a metamorphosis, as CoinGape writes.
Specifically, it has signed a number of deals with major movie studios and TV film rights companies. This has ended the lengthy litigation against trackers that used its torrent file-sharing technology. The BitTorrent technology allowed a person to “seed” a portion of a movie or videogame and others would add to it in a decentralized pulling together of the movie file.
Moreover, BitTorrent technology has since expanded into other areas. The BitTorrent File Sharing System (BTFS) recently signed a deal with ColdStack, a decentralized data storage, and cloud aggregator company. Coldstack’s technology, using BTFS, will allow anyone to store and retrieve their data in different cloud storage systems. It also helps tokenize any file and keep it secure in the Cloud. It can also then be sold as an NFT (non-fungible token).
BitTorrent: A Brief History Lesson
BitTorrent founded by Bram Cohen and later sold in 2018 to Tron (CCC:TRX-USD). Tron was started by a Jack Ma protege, Justin Sun who is also now the CEO of BitTorrent. Tron is also a blockchain with an independent peer-to-peer network. It wants to try to compete with Ethereum (CCC:ETH-USD).
BitTorrent technology and Tron are both peer-to-peer decentralized protocols. BitTorrent uses the Tron blockchain network to function as a cryptocurrency (the token currency is called a BTT).
As of April 2021, BitTorrent, based in San Francisco, has over 100 million monthly active users (MAUs), according to CoinGape. Its BTFS technology allows the desktop creation of smart contracts and decentralized file-sharing. The MAUs also owen the value of its BitTorrent token.
So far this year, the BTT is up twenty-five-fold. Coindesk indicates that it ended 2020 at a price of $0.000289. As of Saturday, May 8, BTT traded at $0.007463 per BTT. That is 24.8 times greater.
Think of it this way. $289 would have bought you 1 million BTTs on Dec. 31. As of May 8, those 1 million BTTs are now worth $7,463. If you have bought $2,890 BTTs, your 10 million BTTs are now worth $74,630. That is probably one of the highest and fastest spikes of all altcoins, other than Holo (CCC:HOT-USD) which is up 26 times.
What to Do With BitTorrent Now
That kind of performance is starting to attract attention. It doesn’t hurt that the BTFS technology is well known with a long track record and a good history. It also doesn’t hurt that the BTT token is connected with another cryptocurrency (Tronix) which also has had a good track record — up over 450% so far this year.
BTT crypto has a market capitalization of $7.39 billion, according to Coindesk on May 8. However, Coinmarketcap says its market value is $4.5 billion. Either way, it seems too low for a protocol and blockchain technology with 100 million MAUs. By comparison, Ethereum, as of June 2020, had about 100 million unique addresses. That could mean it has less than 100 MAUs as one MAU might have several addresses. But Ethereum has a $450 million market capitalization.
In other words, we can say that BitTorrent is undervalued compared to Ethereum, although clearly, ETH is more popular than BTT as a cryptocurrency. For example, at parity BTT could rise from $7.39 billion to $450 billion. Even with a 50% discount to ETH, or $225 billion, BTT would be worth 30 times its present price (i.e., $225 billion / $7.39 billion). This means BTT crypto could rise 29.5 times (i.e. 30.5 minus 1).
Expected Return for BTT
That is the kind of money that a speculative investor might be interested in since the upside is so large. For example, here is how you can assess the expected return: use probability analysis. For example, let’s say there is just a 10% chance that BTT could rise 29.5 times (i.e., 2950%). Let’s also say there is a 90% chance it could fall 80%.
Therefore the expected return is as follows: (0.10 x 2950 = 295%) + (0.9 x -.80= -72%). This equals 223% (i.e., 295-72%). In other words, the expected return is a gain of 223% with just a 10% shot that BTT ends up at a 50% valuation of ETH. This is despite the fact that they both have 100 million users.
Here is another way of putting it. Buy $1,000 of BTT to obtain 134,589.5 BTTs. In several years those BTTs have an expected value that is 323% higher (i.e. 1+2.23), or $3,244 (i.e., 3.23 x 0.07463). That is the expected return at just a 10% chance that BTT rises to 50% of ETH.
Of course, if it did rise to 50% of ETH, the $1,000 investment would be worth 30.5 times more, or $30,500. If that took three years to happen, the average annual gain would be 312% per year on a compounded basis. These are pretty good odds for most investors.
On the date of publication, Mark R. Hake held a long position in Ethereum (ETH) and BitTorrent (BTT).