Upstart exchange BTSE to raise $50M for exchange token on Blockstream's Liquid Network

Dubai-based cryptocurrency exchange BTSE hopes to raise $50 million through a token sale, according to a pitch deck obtained by The Block.  

BTSE's token will be the first exchange token on Liquid, a Bitcoin sidechain built by Blockstream. Most of the existing exchange tokens live on either Ethereum or on their own blockchains. 

Blocksteam and BTSE have not replied to The Block's requests for comment. The sale will not target retail investors as the minimum investment size is $150,000, according to the deck. 

Get down to business

BTSE expects to generate an annual return of 30% from a mining operation in partnership with Blockstream. This is likely tied to Blockstream's August announcement that it would open a new mining facility with 300 megawatts worth of energy capacity. BTSE estimated that the mining operation will be deployed in February 2020.

BTSE currently offers spot and futures trading and over-the-counter (OTC) trading and plans to expand into lending, cryptocurrency debit cards, and aforementioned mining. It will also earn revenue from listing fees. With these revenue streams, the company projects its revenue base to grow from $2.7 million in 2019 to $103.5 million in 2020.

Source: BTSE deck

In the deck, BTSE self-reports about 2,000 regular daily active users and a trading volume of $70 million a day. The firm estimates that futures will drive its total trading volumes in the coming years, hitting over $70 billion per month by the end of 2021.

Through the token sale, the exchange plans to sell a total of 50 million tokens at $1 apiece under the ticker BTSE. Similarly to other exchange tokens, BTSE will be used to reduce trading fees, increase trading limits, and give users access to staking awards.

Burn baby burn

Three months after the token sale, the platform will use 30% of all revenue to buy back and burn tokens until it destroys 100 million tokens out of the 200 million tokens BTSE plans to issue. BTSE estimates that it will buy back and burn $24.6 million in 2020 and $84.1 million in 2021. In comparison, Binance burned $89.2 million of BNB, its native token, in 2018.

The token sale kicked off in October and will continue until Feb. 2020. The sales are divided into three rounds, with three different discount rates and lock-up periods. The discount rates range from 7.5% to 30% and the lock-up periods range from three months to a year. The official token launch date is slated for early March 2020, per the document.

Source: BTSE deck

It's a rough environment for exchange tokens. The total market cap of such tokens declined from $6.44 billion in October to $4.89 billion in November. Binance’s BNB remains the largest exchange token, by far, with a market cap of $2.32 billion. It is more than three times larger than the trailing exchange tokens by Bitfinex, OKEx and Huobi. BNB is currently 47.4% of the total exchange token market cap; trailed by Bitfinex (18.4%), OKEx (15.2%), Huobi (14.0%), KuCoin (1.6%) and FTX (0.9%).