Cryptocurrency companies have had a tough time this year. But two cryptocurrency exchanges, Binance and FTX, have resisted the falls with determination, being able to continue developing their platforms. And although you cannot invest directly in stock market shares as we can do with Coinbase (COIN), in today's lesson for your training in cryptocurrencies we are going to analyze the two tokens of both platforms to see if they offer us a good investment opportunity.
What do these exchanges and their tokens do?🤷♀️
Cryptocurrency exchanges are responsible for matching buy and sell orders from their clients. In exchange, these platforms take a small commission for each of these transactions. Cryptocurrency exchanges like Binance and FTX also offer other services such as staking crypto assets to generate passive income, trading crypto derivatives, crypto lending, and trading NFTs. At the same time, they also have their own tokens, which their clients can use to have more benefits within their platforms.
What is the value of BNB, the Binance exchange token?🧏♂️
BNB is currently the third largest digital asset by market capitalization (if we exclude stablecoins). This token has four strengths:
1. Investors pay lower fees using BNB.👩💻
Within their platform, commissions are reduced when using BNB for payment (compared to entering and exiting dollars, for example), so they have more incentive to keep the token as their "base" trading currency. . Paying less commissions is a fundamental pillar for our long-term training in cryptocurrencies. Binance is the cryptocurrency exchange with the highest trading volume in the world. In any given month, it processes more trading volume (green bars) than its next four competitors combined. —2022/09/curso-formacion-inversion-criptomonedas-23-1024×640.png Spot trading volume of the top 5 exchanges during 2022. Source: CryptoCompare. And the same goes for the volume of crypto derivatives (green bars): Binance processes more volume than its eight closest rivals.
Monthly derivatives volume history of the main exchanges. Source: CryptoCompare.
2. Binance has its own blockchain.⛓️
Indeed, Binance has its own blockchain, the Binance Smart Chain (BSC). Since its users need BNB to pay transaction fees, the demand for BNB grows as its blockchain grows. After the collapse of the blockchain Earth Moon, BSC became the second largest decentralized finance (DeFi) blockchain (recently falling to third position behind TRON) in terms of total value locked (TVL) within its smart contracts, with more than half of them coming from the decentralized exchange, PancakeSwap (CAKE). According to data pulled from DappRadar, BSC also has the second-highest number of daily users of any blockchain, just behind the popular WAX gaming blockchain.
DeFi market share by total value locked (TVL). Source: Defillama.
3. BNB supply is decreasing.😲
There are about 165 million BNB, but that number is expected to reduce over time. That is due to BNB's token burning mechanism, which "Quema» your tokens regularly (sending them to an inactive wallet address) and will continue to do so until only 100 million BNB remain. If the supply of BNB continues to fall while demand for the token continues to increase, a long-term price appreciation (all things being equal) is very likely for this token. This is a fundamental principle for your cryptocurrency training; the law of supply and demand.
BNB token burning history. Source: Twitter.
4. BNB has outperformed Bitcoin during the last bear market.😎
Most digital assets tend to fall much more than the Bitcoin during a bear market, but that has not been the case for BNB. It has risen 50% against bitcoin since November of last year. Of course, it has dropped 56% if we take US dollars as a reference during that period of time. But the fact that it has held up better than the king of the ecosystem during this fall is a testament to its resilience. As an added bonus, BNB outperformed bitcoin during the 2018 bear market.
BNB on parity with Bitcoin. Source: TradingView.
What is the value of the FTX exchange token, FTT?🧏
FTX hasn't been in the cryptocurrency ecosystem as long as Binance, but it has quickly established itself as one of the leading exchanges. Like BNB, the FTT token also has four strengths:
1.FTT market capitalization has growth potential.📈
Being such a young token, it has a market capitalization close to $4.000 billion, meaning there could be huge upside potential if the exchange continues to grow. FTT's capitalization is less than 10% of BNB's, which is around $46.000 billion. FTX processes only a fraction of the trading volume that Binance currently bills, but that could change over time as it builds out its product offering. As with Binance and BNB, investors are incentivized with lower fees when using FTT on the exchange, so there is already widespread demand for the token.
Comparison of the price of FTT if it had the market capitalization of BNB. Source: Marketcapof
2.FTX stands out as a crypto derivatives platform.🧮
Investors can buy or sell a wide variety of derivative products that track different areas of the cryptocurrency market, including Defi (DEFI-PERP), privacy tokens (PRIV-PERP), or for example a general basket of altcoins (ALT -PERP). FTX offers us tokens that track the prices of stocks like Netflix and Tesla, and “speculation markets” that allow us investors to trade on a range of real-world outcomes, including election results.
Tracking the price of shares within the FTX exchange. Source: FTX.
3. The FTT is also ending its offer.😲
Right now there are about 330 million FTT tokens, up from 350 million. And, according to the exchange's website, these will be burned until at least half cease to exist. If demand for the token continues to grow as the exchange gets larger, it could give a serious long-term boost to its price.
FTX exchange statistics. Source: FTX.
4.FTT has been gaining market share from other cryptocurrency projects.🚀
Like BNB, FTT has outperformed bitcoin since the market peaked in November, although only by 40% versus 50%. That being said, FTX has been gaining market share against the global cryptocurrency market over the past three years. FTT now represents about 0,40% of the total market capitalization of cryptocurrencies, up from 0,01% in 2019. BNB has also outperformed the rest of the market, mind you, but it already has almost 5% of the total share of the crypto market.
Dominance of the FTT token over the cryptocurrency market. Source: Tradingview.
What conclusions do we draw for our training in cryptocurrencies?💭
When we invest in cryptocurrencies, there is always the risk of market volatility. And when we invest in exchange tokens, there is also an added risk regarding regulation. Authorities could determine that those tokens are essentially shares in a cryptocurrency exchange. This means that both Binance and FTX would have to do a whole series of procedures when they sold those tokens for the first time (which, of course, they didn't do...).
BNB Faucet by TradingView
This whole thing could create confusion among investors, but we don't think it's anything more than a setback for these companies. Both are well-funded, after all, and have armies of lawyers to fight such battles with. It should be noted that taxation within our training in cryptocurrencies is a point to take into account, especially during this last year in which governments have begun to get serious about regulating the crypto market.
