Pricing LSTs

The Complex Price Dynamics of LSTs, BPIs, and CICs

Let’s be frank: we are entering murky waters. In the current economic system, the answer to a simple question like, “How much is that doggie in the window?” is influenced by a plethora of variables. The most notable variable is, “How much are you willing to pay for doggie?” (especially when considering the insistence of the child who is asking for it).

Just like there are no set rules for setting the price of the doggie, there are no set rules about determining the opening price of an LST.

What we can do is provide simple pointers on crafting the narrative that supports your LST. Ultimately, the more you can inspire the market, the higher the opening price of your LST. That said, an over-the-top opening price - based on an overly-optimistic narrative - will result in poorly performing BPIs, which will result in the value of your LST crashing. This is an area where you will have to seek professional guidance.

In Part 3 we explore in more detail how to determine your LST, BPI, and CIC in relation to your go-to-market strategy. For now, let’s simply explore some of the variables you will need to consider.

Current State Valuation

During the Initial Coin Offering (ICO) or token sale phase, interested investors have the opportunity to purchase your LSTs at a specific price set by you. The following factors could be taken into account:

The underlying real estate market value of the land assets

Baseline metrics - today’s BPI - from which the projected impact of proposed regenerative projects can be compared (the more degraded, the better the potential)

Market demand for sustainable/regenerative investments

The reputation of the issuing organization

The track record of the team leading the project/s

Overall market sentiment.

Envisioned State Valuation

The opening price of an LST is heavily influenced by the perceived gap between baseline metrics and anticipated metrics - tomorrow’s BPI. The quality of the narrative around “what is” and “what could be” plays a crucial role. As BPIs improve, demonstrating positive changes in biodiversity, community well-being, regenerative practices, and other relevant factors, the value and desirability of the LSTs increase. Investors recognize the potential long-term benefits of supporting projects that contribute to positive bioregional progress, which leads to increased demand for the tokens and upward pressure on their price.

Tracking Progress

In addition to the BPIs, other market dynamics and investor perception can also influence the price of LSTs. Factors such as overall market sentiment towards regenerative investments, changes in regulatory frameworks, geopolitical events, climate disasters, and economic conditions can all impact the demand and supply of these tokens, thereby affecting their market price. Investor sentiment regarding the credibility and transparency of the token issuer, as well as the liquidity and trading volume of the tokens, can also shape the price dynamics. All of these variables should be tracked and made transparent.

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