AI agents are a track I'm very optimistic about in this market. Although the entire track is currently in a state of silence for various reasons, many projects are still continuing construction and improvement.
Virtual is one of them.
In this article, I attempt to analyze Virtual's investment value from a financial perspective.
As I wrote in previous articles, information about project financial conditions is extremely lacking in the current crypto track. Virtual is no exception. Moreover, the entire AI agent track has only emerged recently, making such information even more scarce.
I found two pieces of information online with some reference value:
The first is the financial information publicly released by the Virtual team on their Twitter on December 31st last year (https://x.com/virtuals_io/status/1874111116403761316).
This information revealed that Virtual's annual revenue at the time was $300 million. The definition of this "revenue" is unclear, and I estimate it to be income. Since no further data could be found, we'll tentatively use "income" for estimation.
The second is a news article published on TradingView in late 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 dropped from $1 million on January 2nd to $35,000 on February 27th.
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 current free cash flow for prediction and linear extrapolation. However, the available information cannot calculate the current free cash flow. Therefore, we can only roughly use "income" as a substitute for free cash flow estimation.
Last December was the peak period for the AI agent track, so the annual income of $300 million shown in the first piece of information is its peak value.
By late February this year, which was a low point for AI agents, the daily income of $35,000 translates to an annual income of $13 million.
I'll still use 12 as the "future PE" estimation value. So Virtual's "intrinsic value" is approximately $160 million to $3.6 billion.
From this estimation process, we can see a considerable gap between the optimistic and pessimistic valuations of its intrinsic value.
The primary reason for this gap is the uncertainty of the project's future development. This uncertainty can be further broken down into two aspects:
First, how will the "AI Agent + Crypto" track develop in the future.
Second, how Virtual will be positioned and develop within this track.
Regarding the first point, I've always been optimistic about its future development, but uncertain about whether the future application scenarios and business models will be the same as what we see today.
In the Web 3 ecosystem, the current situation of this track is obviously not good.
However, if we look beyond the crypto ecosystem to the broader AI track, we'll find that whether in Web 2 or Web 3, there are very few application projects that have truly found a good business model. Even top projects like OpenAI are currently lacking in commercialization, with subscription fees unable to support their operations.
Among all AI enterprises, only NVIDIA, as an infrastructure provider, has a good business model.
So this may not be 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, Virtual is one of the few profitable projects I've seen. Most other projects, no matter how cool their described scenarios or advanced their displayed technologies, still show no obvious profitability, let alone boldly disclosing their revenue status.
Therefore, in the current AI + Crypto track, Virtual's future revenue status has great uncertainty, but looking across the entire track, I don't see many projects with more certainty than it.
We've roughly estimated Virtual's intrinsic value, and now we'll look at its "price". Here we can only look at its token.
Regarding token value judgment, I've expressed my views in several previous articles:
The value of a pure governance token is extremely limited. Only when it becomes a token with true equity value or becomes an indispensable "commodity" for the project does the token have value.
In this regard, Virtual clearly states that it hopes to develop the token into a currency used daily in the AI agent "country" and has been implementing similar practices in its operational history.
Whether this goal can be achieved can only be proven by time, but the effort towards "utility" is correct. In this aspect, 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 fully diluted market cap is $580 million. If we calculate based on the lower limit of "intrinsic value" at $160 million, it is definitely overvalued. So I won't buy more. But for such a track and such a project, I'm willing to give it more patience and will therefore retain the tokens I currently hold.
