The x-axis represents the Weighted Average Token Price Multiple over the last quarter. We start with multiple instead of the actual token price to highlight the difference between the increases in the token price and the smaller reported increases in our holdings. The y-axis represents the End of Quarter (EOQ) Holding Value Multiple which we multiply by the cost basis of Ulu’s holdings to calculate final value.
The blue dashed line (top line in the chart) represents the gross EOQ Holding Value Multiple. There is a 1:1 correspondence with Weighted Average Token Price Multiple.
The red line (second from top) represents the reduction due to taxes on gains, currently approximately 30%, including federal and state taxes. Below 1x Weighted Average Token Price Multiple, there are no gains or taxes, hence the gross Holding Value and the net of tax Holding Value are the same and the dashed line and the red line perfectly overlap.
The grey (third / circle) and the green (fourth / square) lines represent the reduction due to both taxes and a 50% and 90% liquidity discount on gains respectively. As previously mentioned, we do not apply a liquidity discount to the cost basis of our investment; hence the gross Holding Value and net Holding Values are the same below 1x Weighted Average Token Price Multiple and all of the lines overlap.
The solid black vertical line at 8.5x represents the weighted average token price for Q3. This line intersects the 90% liquidity discount line (our current liquidity discount level) at the red circle. Referring back to one of our holdings, this translates to a 1.53x EOQ Holding Value Multiple. In other words, we are marking up an initial $1.5M investment to $1.5m*1.53 = $2.3M.
. . . . . .
We are confident this valuation method meets the criteria we laid out in our “Four Pillars for Valuing Digital Assets.” We’re keen to know what you think.