• Bear Market Valuations

Liquid and QASH Deep Dive

In this article, we review in depth Quione’s Liquid Exchange and on its utility token – QASH – which will soon be rebranded to Liquid Coin (LQC). Since our last article, there have been a number of developments that we believe make QASH a more compelling investment even at its higher price point*.

*Note 1: The price of QASH has risen 41% from $0.073 USD (when we first started coverage) to $0.10 USD at the time of this writing.

Note 2: This material is advisory only, and any positions taken may be at your own risk. BMV may hold positions in the underlying assets. Naturally, we do tend to believe our own research.

These clarifications have reduced our development risk concerns, and risk-tolerant investors should take positions in QASH for higher returns.

Why We Believe Liquid Will Be Successful:

From our overview of the competitive Cryptocurrency Exchange Market, we came to the conclusion that just a few exchanges would capture an outsized share of the market. Of these potential winners, we found the most interesting exchange on the market to be ‘Liquid’ – an exchange relatively unknown outside of Japan (at least among new-to-intermediate investors).

Liquid has key existing differentiators that will drive its success:

  1. Regulation, Licensing, and Cold Wallet: In the long-term, we hold that non-regulated exchanges will either have to seek out regulation, or they will face pressure from declining trade volume. As the market matures, traders are increasingly unwilling to take on the counterparty risk from unregulated exchanges. Further Liquid is likely the most secure cryptocurrency exchange, and exclusively houses customer funds in a cold wallet

  2. Substantial Existing Volume: Among non-wash trading exchanges, Liquid is consistently among the top 3 for BTC volume, and among top 10 for total volume. As explained in our initial report, we believe legitimate volume (i.e., Liquidity), is a key determinant of future success. While CoVenture Research did not cover Liquid deeply, they were ranked among the top exchanges.

  3. Fiat Liquidity Sharing: Liquid has the ability to ‘spread’ its existing volume across other fiat pairs. This is an enormous point of differentiation: instead of having to build liquidity in each fiat trading pair Liquid can immediately open a new fiat pair using its top 10 liquidity. This is accomplished through a real-time foreign-exchange matching engine (Internal Worldbook). See below for an example pulled directly from the Liquid order books.

To be clear, the three points above EXIST TODAY. This is not waiting for launch, development, or adoption – these are clear differentiators that Quoine / Liquid have already launched.

Liquid’s longer-term vision capitalizes on these differentiators to build a compelling future:

  • Fiat Expansion: Given Liquid’s competitive advantage in adding new fiat pairings (see point #3 above under differentiation), they logically plan to continue adding fiat pairs – which will unlock liquidity from relatively under-underserved fiat markets (Australian Dollar, etc.). They have indicated that GBP will be the next addition.

  • Inter-Exchange Liquidity: The over-saturation of exchanges in this market has led to an overall lack of liquidity for large investors / institutions due to fragmentation. Liquid is working to solve this through a central exchange-linked order book that allows 18 regulated exchanges (including Gemini and Bitfinex) to share liquidity. This will be an industry-wide shift, and has been hinted at coming later in 2019.

  • Security Token Platform: While Liquid has been used for several ICOs, these have not been particularly successful. However, Liquid is leveraging its experience and regulated position to enter the security token market. We at BMV believe this to be a natural fit for Liquid, and longer-term see them taking aim at, or partnering with, existing Equity markets. This platform will be built on Liquid’s distributed ledger.

  • Perpetual Swaps: For traders who prefer non-expiring futures; given BitMex’s loosely regulated position this is a welcome bit of market expansion.

  • Merchant Partnerships: Quoine recently announced they were partnering with a large Japanese retailer on payment services. While this is mostly focused on Crypto awareness, this is an interesting new development (Merchant is speculated to be Rakuten).

  • Custody Solutions: One of the biggest complaints about Liquid has been a necessary feature of its security – all of its funds were housed in a cold wallet with manual withdrawal processing. Quoine recently announced it was using Multi Party Computing (MPC) technology to dramatically increase both the number, as well as the speed, of crypto withdrawals. This should solve one of the biggest customer complaints Liquid has faced.

  • UI / UX Upgrade: Liquid is planning a UI / UX upgrade sometime in the next few months.

  • Liquid Distributed Ledger (LDL) Migration: Longer-term, Quoine plans to migrate back-end components of Liquid onto its LDL. This will make it both the first customer of its own LDL, as well as the largest decentralized exchange.

  • Other Developments: There are other exciting developments such as a social platform, tiered fees, JPY Stablecoin development, etc. but we do not have enough detail on these to credibly write them up.

How does that translate to the QASH / LQC valuation?

To create a valuation using Call Option Valuation theory, we first have to understand where real and potential QASH / LQC value might come from. We lay out our current thinking below:

Baseline Value: $0.60 USD

At the moment, we believe the only value that can be accurately included in the baseline value is Liquid’s Trading fees. On February 27th, 2019 Quoine announced fees would be a flat 10 bps (0.1%) per trade (regardless of Maker or Taker), and would only apply to global transactions at this time.

Using our updated model and order book analysis, we believe QASH should be trading at $0.60 per token (This is our one-year price forecast, discounted with a 20% cost of capital).

Speculative Payoff: Positive, But Not Valued At This Time

As you have seen above, Quoine / Liquid has ambitious aspirations. Key elements that we think will drive longer-term value for QASH / LQC are:

  • Global Fee Expansion (via launch of new fiat pairs)

  • Introduction of Japanese Trading Fees

  • Introduction of Withdrawal Fees

  • Use for Lending Fee Discount

  • Potential for Custody Solution Fees

  • Staking Options (once LQC Mainnet is launched)

  • External Worldbook Settlement / fees

  • Use as an Asia-based currency

Overall: While we have not valued the cumulative speculative payoff, it is substantially above zero. As such, we believe fair market value for QASH / LQC is higher than $0.60, and will only increase should the team provide additional clarity on longer-lead items.

Questions or Comments? Reach out at

Liquid Affiliate Link:



This article is not sponsored, or in any way linked to Quoine or Liquid. We are a fully independent group, and this article represents our collective thoughts.

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