Opinion Piece: What is the true value of Dragon Coins?

Have you heard about the latest ICO that is bring VIP gaming in Macau into the 21st century? The name of the company is called Dragon Inc and they are launching an ICO which will bring about the Dragon token (DRG) that will allow seamless transfer of credit to the junkets in Macau for these VIP gamers.

In the old world, junket operators will facilitate the credit that is extended to the VIP gamers for gaming in their junket rooms. This credit is not cheap and it costs the junket 5% fee to facilitate the credit for the VIP gamers. 

Dragon token (DRG) intends to change all that. With the cryptocurrency DRG, which can be traded on many of the major crypto exchanges, DRG will become an easily convertible cryptocurrency and gamers and junket operators can transfer credit or funds across borders with fees much less than the 5% currently absorbed by the junket operators. On top of that, VIP gamers will be able to repatriate their winnings without the typical 5-7% transaction fees too.

So How Valuable Will DRG Be?

I tried to gather sufficient date for analysis but this is not an easy feat.

The Gross Gaming Revenue data is available from the Macau Gaming Inspection and Coordination Bureau but there are no aggregated data sources for all the individual junkets. Currently there are about 190 licensed junket operators and 40 of them account for 80 percent of the revenue.

The Rolling Chip turnover (Rolling chip drop or volume is the amount of rolling chips wagered and dropped at the table; like cash is dropped) data is the key to understanding DRG true value and I am using data from some of the casino to estimate the real Rolling Chip Turnover for Macau. Reason being that reports from most junket operators are not unaudited and they are not aggregated at a single source.

The Rolling Chip turnover or volume is the most important statistic for our analysis as this determines the demand for DRG.

I intend to evaluate how big the potential market for Dragon will be and estimate the true value of DRG. Do note that this article express just my opinion and is not the work of a financial advisor; so read with caution but have fun reading.

Total Gross Gaming Revenue (GRR) for Macau has been growing in 2017 and this number can be estimated to be between $2.49 billion to $3.3 billion USD monthly. Data is from the Macau Gaming Inspection and Coordination Bureau as well as the below 2 articles.

https://www.reuters.com/article/us-macau-gambling-revenues/macau-casinos-post-11th-month-of-gains-on-vip-resurgence-idUSKBN19M3AQ

https://www.casino.org/news/macau-casinos-post-15th-straight-monthly-gain

We understand that VIP gaming accounts for 50% to 57% of the GRR. This makes VIP gaming revenue between $1.42billion to $5.79billion USD monthly.

Rolling Chip Drop data can vary from operators to operators and looking at the Rolling Chip Drop data from the below 3 casinos, we can understand that the VIP Revenue is 2.7% - 3% of the Rolling Chip Value.

Estimating Rolling Chip Volume for Macau

Hence we see that the Rolling Chip Volume monthly for the entire Macau should be between $52.59 billion to $214.44 billion USD. I derive this by estimating that the monthly VIP gaming revenue (between $1.42billion to $5.79billion USD) to be 2.7% of the Macau Rolling Chip Volume.

A Rolling Chip Drop or Volume of $52.59 billion to $214.44 billion USD would imply that $1.753 billion to $7.148 billion USD volume per day will be required if DRG is being used by all junket operators in Macau.

Estimating DRG Eventual Price

However lets estimate that Dragon Inc only capture 20% of the market, this would mean a $350.6 million to $1.43 billion USD daily demand for DRG tokens.

With an eventual DRG supply of 21 million tokens after burning, this means that this 21 million DRG coins need to support a daily turnover of $350.6 million to $1.43 billion USD daily. 

Looking at https://coinmarketcap.com, ignoring the top 10 coins which have wild volatility in trading volume, the trading volume of the top 10 – 20 coins is 2% to 10% of the total market cap. We will use 5% as an average.

Hence the total market cap of DRG will be ($350.6 million to $1.43 billion USD) / 5%. This implies a total market cap of  $7.012billion to $28.59billion USD. 

Hence with a volume of 21 million tokens, each DRG will be worth $333.9USD to $1361.42 USD. This number is huge and assume Dragon captures 20% of the market. 

$333.9USD to $1361.42 USD is Huge! But Dragon has only 2% of the Market at Present

At the present moment, Dragon has only signed up 4 junket operators out of the 196 licensed operators so that is 2% of the market, so the starting value of DRG should be about 1 tenth of the above estimated value. $33.39 to $136.142 USD per DRG coin.

So my opinion of DRG is that with just 2% of the junket market, we will see a low end estimate of $33.39 for each DRG and if Dragon Inc managed to capture 20% of the market, we will see a value of $333.9 USD at least. This is my personal opinion of where DRG is heading to. 

Boonster

Please check my calculations if you wish and do not take my opinion as a recommendation to invest. 

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