The Token Insight team notes that in the crypto-asset sector, it’s always challenging to accurately provide realistic valuations for digital assets. At present, there’s no consistent or uniform industry-standard or reliable valuation method that would allow us to discover the real value of cryptocurrencies, the Token Insight team states.
Many digital currency exchanges have issued their own platform tokens which are supposed to directly relate to the performance of their platform or overall business. Exchange tokens are a “unique” category of crypto-assets and may be “fairly evaluated,” because of their inherent properties of “stable currency flow,” according to a report from Token Insight.
The report states:
“We have found that the transaction [volume] on exchanges is highly correlated to the market, directly affecting the [revenue] of each specific exchange.”
The Token Insight team has created a quantitative method which allows them to “construct the valuation of exchange tokens structure,” so that they can perform standardized analysis for exchange tokens based on the exchange’s activities, and then be able to determine the “actual value behind each exchange.”
The report notes that Binance Coin (BNB) has had “a very strong positive correlation with the majority of exchange tokens in Q2 2020, but the rolling 30 Day correlation with other exchange tokens has dropped significantly.” Meanwhile, HitBTC’s HBC is exhibiting “an extremely negative correlation with the majority of others in Q2, [and] the rolling 30 Day has changed to almost all strong positive correlation intervals.”
Huobi Token (HT), FTX exchange (FTT), HitBTC (HBC), and Bitfinex’s (LEO) have “a relatively high rolling 30 Day correlation.”
Based on these findings, the report claims that Binance’s BNB token and OKEx’s OKB token are undervalued. Huobi’s HT and FTX exchange’s FTT are also currently undervalued, according to the report’s analysis.
HBC is valued at around what it should be, the report claims. Meanwhile, KuCoin’s exchange token, KCS is overvalued. BitMart’s BMX token is valued at approximately the price which it should be, given current market conditions, the report noted. It added that Bitfinex’s LEO token is overvalued.
These exchange based cryptocurrencies aim to serve mainly as utility tokens, meaning that they may be used to qualify for special discounts while conducting transactions on digital asset trading platforms. They’re really meant to encourage users to trade more, because investors are “rewarded” with exclusive offers that are not available to others who may not hold these exchange tokens.
Binance Coin or BNB is by far the most successful exchange token. It currently has a market cap of over $3 billion and is accepted in many other places or platforms, besides just Binance. It can be argued that BNB has emerged as one of the most widely-accepted cryptocurrencies.
While BNB has been successful, like many of Binance’s other initiatives, the exchange continues to offer services in multiple jurisdictions without authorization.