AI agent is a track that I am very optimistic about in this round of market. Although the entire track is now quiet for various reasons, there are still many projects in the track that are still being built and improved.
Virtual is one of them.
In this article, I try to analyze the investment value of Virtual from a financial perspective.
As I wrote in the previous article, in the current crypto track, information about the financial status of projects is very scarce. Virtual is no exception. What's more, the entire AI agent track has only just appeared, and information in this regard is even more scarce.
There are two pieces of information that I can find on the Internet that are of certain reference value:
The first is the financial information publicly released by the Virtual team on its Twitter on December 31 last year (https://x.com/virtuals_io/status/1874111116403761316).
This information revealed that the annualized revenue of the Virtual project at that time was $300 million. The definition of "revenue" is unclear, I guess it is income. Since no further data can be found, we will use "income" for estimation.
The second piece of information is a news published on tradingview at the end of February this year (https://www.tradingview.com/news/todayq:1af82f429094b:0-virtual-protocol-revenue-drops-97-as-ai-agent-demand-declines/).
This news shows that Virtual's daily income fell from $1 million on January 2 this year to $35,000 on February 27.
To estimate Virtual's intrinsic value, we need to look at future free cash flow. To estimate future free cash flow, we can only rely on existing free cash flow to predict and linearly extrapolate. However, the information at hand is not enough to calculate the current free cash flow. Therefore, here we can only use "income" instead of free cash flow for estimation.
December last year was the boom period of the AI agent track, so the annualized income of 300 million US dollars shown in the first information above was its peak value.
The end of February this year was the low point of AI agent, with a daily income of 35,000 US dollars, which is an annualized income of 13 million US dollars after conversion.
I still use 12 as the estimated value of "future PE". Then Virtual's "intrinsic value" is about 160 million US dollars to 3.6 billion US dollars.
From this estimation process, we can see that there is a considerable gap between the optimistic and pessimistic valuations of its intrinsic value.
The biggest reason for this gap is the uncertainty of the future development of the project. This uncertainty can be further decomposed into two aspects:
The first is how the "AI agent + Crypto" track will develop in the future.
Second, what will be the future positioning and development of Virtual in this track?
Regarding the first point, I have always been optimistic about its future development, but I am not sure whether the future application scenarios and business models of this track are the scenarios and models we see today.
In the Web 3 ecosystem, the current situation of this track is obviously not very good.
But if we jump out of the encryption ecosystem and look at the broader AI track, we will find that whether it is Web 2 or Web 3, there are very few application projects that have really found a good business model. Even top projects like OpenAI are not very commercialized at present, and their subscription fee income cannot support their operations at all.
Among all AI companies, only Nvidia, as an infrastructure provider, has a good business model.
So this is probably not just a problem of the crypto ecosystem, but a problem of the entire AI track.
Regarding the second point, among the many AI + Crypto projects currently, Virtual is one of the few profitable projects I have seen. Most other projects, no matter how cool the scenes they describe or how advanced the technology they display, have not seen obvious profits so far, let alone boldly disclose their revenue status.
So in the current AI + Crypto track, Virtual's future revenue status is very uncertain, but looking around the entire track, I can't see that there are a few projects with better certainty than it.
We have made a very rough estimate of Virtual's intrinsic value, and now we have to look at its "price". Here we can only look at its tokens.
Regarding the judgment of the value of project tokens, I have expressed my views in several previous articles:
The value of pure governance tokens is extremely limited. Only when they become tokens with real equity value or become "commodities" that are indispensable to the project, such tokens will have value.
In this regard, Virtual has clearly stated that it hopes to develop tokens into daily currency used in the AI agent "country" in the future, and has been implementing similar practices in its operations.
Whether this goal can be achieved can only be proved by time, but this approach of striving towards "practicality" is correct. So in this regard, it is much stronger than many long-established projects.
Finally, let's judge whether the current token price is overvalued.
As of the time of writing, Virtual's full circulation market value is US$580 million. If we use the lower limit of "intrinsic value" of US$160 million, it is definitely overvalued. So I will no longer buy it. But for such a track and such a project, I am willing to give it a little more patience, so I will keep the token in my hand.
Anais
