Coinbase is listed, and the entire history of cryptocurrency has been written with a lot of color. At this point, a new pattern of crypto exchanges has also been formed imperceptibly. How strong is Coinbase? Not necessarily, Binance, which has a huge ecosystem, is still expanding, and its underestimated value is gradually manifesting.
On April 16, Binance announced that it would burn a total of 1,099,888 BNB in the 15th BNB quarterly burn (January-March 2021). The BNB burned this time is worth US$595,314,380. At the same time, this is also the highest destruction value in history, reaching about 80% of Coinbase’s net profit.
Interestingly, according to Binance’s past destruction of 20% of its profits, I can roughly estimate that its profit in the first quarter will be at least 3 billion U.S. dollars, so the annual profit will be around 12 billion U.S. dollars, which is almost a Tencent’s annual profit ( Tencent has a net profit of 17.3 billion in 2020).
Immediately afterwards, on April 18, Binance founder Changpeng Zhao tweeted: “The BNB held by the Binance team (accounting for 40% of the total BNB) will be destroyed. We have not sold any of them since the ICO. BNB is currently worth 37 billion U.S. dollars.”
Although the above information is an old news recap, the current popularity of Binance in the financial market has aroused attention and reports in the traditional finance and brokerage fields. After all, in the traditional financial market, there is no smashing pressure and constant deflationary targets are rare.
Binance burns nearly 600 million U.S. dollars of BNB, another record high
On April 14, Coinbase, a digital currency compliance exchange, was officially listed on the Nasdaq Stock Exchange in the United States. This is a significant milestone in the history of the development of the digital currency market, and it also means that the traditional market has finally recognized the digital currency market. The status of the cryptocurrency industry is also different. The greatest significance of Coinbase’s successful listing is to prove the legal compliance of the cryptocurrency industry.
On April 14, the opening price of Coinbase on the first day of listing was US$381. It rose by more than 52.4% during the intraday market. The market value broke through US$110 billion, and then quickly fell back. Finally, it closed up by 31.31%. The total market value was approximately US$64.6 billion, far exceeding the market value. NASDAQ’s $26 billion.
Coinbase’s 2021 first quarter performance report is more eye-catching. In the first quarter of 2021, Coinbase achieved revenue of 1.8 billion U.S. dollars, with a net profit of between 730 million and 800 million U.S. dollars, which was 200% of last year’s annual profit. Compared with Coinbase, Binance’s quarterly performance overshadows it.
After the 15th quarter of BNB burns, the total supply of BNB has been reduced from 170,532,825 BNB to 169,432,937, and the final deflation target set by Binance is “100 million”. According to the previous method of burning 20% of profits, Binance’s profit in the first quarter may reach nearly 3 billion U.S. dollars, far exceeding Coinbase’s 800 million U.S. dollars. “The world’s largest information technology and business solutions company” IBM’s net profit in the first quarter of 2021 was only 955 million U.S. dollars, which is much inferior to Binance’s nearly 3 billion U.S. dollars. The internationally renowned investment bank Morgan Stanley’s net profit in the first quarter of 2021 was US$4.1 billion. With the continued bull market and the rapid development of Binance, it is not impossible for its profitability to surpass “Motorcycle”.
Binance CEO Changpeng Zhao also shared his thoughts on this BNB burn. He said that to be honest, he can’t list all of them. But the following reasons are important:
1. The community and Binance team have persisted in construction for the past three and a half years, and have never stopped;
2. The rise of the DeFi field and the prosperity of Binance Smart Chain (BSC) ecology;
3. The listing of Coinbase may have boosted the price of BNB;
4. The overall development of the crypto asset industry;
5. The majority of users’ support for Binance ecology (this is the most important).
On April 12, the BNB price rose to a maximum of $638. So far this year, the increase of BNB has been close to 1,300%, and the market value of BNB has surpassed some traditional financial institutions. On April 18th, in the context of the adjustment of the entire crypto market, BNB also fell sharply. As of the publication of this article, the price of BNB was US$486, and the total market value of BNB was approximately US$75 billion, which has surpassed the Bank of New York Mellon (US$40.9 billion) and Bank of Montreal (58.8 billion U.S. dollars).
Obviously, BNB is still in the stage of value discovery. Comparing the valuations of Coinbase and BNB, the true valuation of BNB may be more worthy of investors’ attention. Binance has huge advantages in terms of transaction volume, profitability, and number of users. As the entire digital currency market continues to rise and Binance ecology continues to empower BNB, the valuation of BNB at that time will be at least over 100 billion US dollars. What is the concept of a market value of hundreds of billions of dollars? The total market capitalization of Goldman Sachs is 117.6 billion U.S. dollars and American Express is 119.6 billion U.S. dollars. There is a long way to go. It is worth looking forward to how Binance can support the market value of hundreds of billions of dollars when the development of the crypto market is not really mature.
If you look at the profit level, the financial report shows that Tencent’s full-year net profit in 2020 will be 122.7 billion yuan, which is equivalent to about 17.3 billion US dollars. And if the profit of Binance in the first quarter of 21 is estimated based on 600 million U.S. dollars, the volume should be about 3 billion U.S. dollars. If the whole year is flattened, the annual profit is expected to reach 12 billion U.S. dollars.
The market value of Tencent is currently 5.96 trillion yuan (over 850 billion US dollars). If calculated purely according to the company value = price-to-earnings ratio (PE) × net profit, although the maturity of the industry is different, the cyclical performance is different, which leads to the difference in the price-to-earnings ratio. The market value of Binance should be at least in the range of US$100-300 billion.
With the development of the entire industry, this day may not be far away.
“Hard-core” Binance, with more than half of the futures market share
Nowadays, the development of the digital currency market is becoming more and more mature, and the competition of centralized exchanges is becoming more and more fierce. However, the results of this “power tug of war” are becoming more and more obvious.
Among the exchanges established after June 2017, except for a few exchanges such as Binance and Bybit, most exchanges have closed down or are dead.
At the beginning of its establishment, Binance focused on cryptocurrency spot trading. At that time, it took only half a year to reach the top of the global exchanges. This legendary history can be described as difficult to replicate.
In March and April 2021, the price of encrypted assets has generally risen, and its total market value has increased from a minimum of 1.6 trillion U.S. dollars to a maximum of 2.2 trillion U.S. dollars. With the huge correction of the crypto market on April 18, the total market value of cryptocurrencies fell back to a minimum of $1.97 trillion. The market value of Bitcoin is still strong and dominates the market, accounting for a proportion of 51-65% of the total market value of the crypto market.
From the perspective of spot trading, Binance, Huobi, OKEx and Coinbase steadily occupy the top four spot exchanges.
As of April 18, 2021, Binance Exchange’s 30-day spot trading volume was US$1,010 billion, accounting for 53.26% of the total trading volume of all exchanges, which is greater than the total of Huobi, OKEx, and Coinbase. Huobi, OKEx, and Coinbase’s 30-day spot trading volume totaled 320 billion U.S. dollars, 244 billion U.S. dollars, and 92.7 billion U.S. dollars, accounting for 16.88%, 12.88%, and 4.88%, respectively.
Like the spot market, the futures contract market also has a similar “head effect.”
As of April 18, 2021, Binance Exchange’s 30-day perpetual contract trading volume was US$1,204 billion, ranking first. It is closely followed by Huobi Exchange, whose total perpetual contract trading volume is only US$601.1 billion. In contrast, OKEx’s performance was even more eclipsed, with the total transaction volume reaching only 171.4 billion US dollars.
It cannot be ignored that some second-rate derivatives exchanges are catching up, and the possibility of changing the pattern of the futures market cannot be ruled out in the future. Compared with small-scale exchanges, giant exchanges are also trying to expand their competitive advantages. It’s hard to grab food from a tiger’s mouth.
It is worth mentioning that Binance’s contract trading was not officially launched until September 2019. Don’t be afraid of being late, just be afraid of not. As Binance is accelerating its expansion in the crypto derivatives market, according to the investment needs of users, it has invested huge energy, financial resources, and manpower to launch contract services quickly.
At the beginning, many people did not understand why Binance valued the derivatives market so much, or even believed that Binance’s contract transactions could occupy a certain market share. In addition to the characteristics of high leverage, high risk, and high yield, encrypted derivatives have the advantages of flexible design, short product innovation cycle, and low transaction costs compared to basic encrypted products, which can better cater to the preferences of traders.
BitMEX used to be the leader in the bitcoin futures market, but due to regulatory issues, it eventually fell into the altar, which also prompted Binance Futures to have a chance to win in the chaos.
The development of the cryptocurrency market will only get faster and faster. As the Bitcoin bull market continues, Bitcoin soars to over $64,000, and more cryptocurrencies will continue to dance in this market. Exchanges are still the core infrastructure of the crypto market. In this context, compared with the spot market, the derivatives market has a huge space. Only exchanges that occupy more of the derivatives market can have a greater say.
Is BSC blessed by DeFi better than Ethereum?
Binance has never stopped building its own “moat”. “Big Mac” Binance involves all important tracks in the field of cryptocurrency and blockchain. Including spot, derivatives, mining pool, DEX, public chain, stable coin, DeFi, NFT.
After occupying the spot and derivatives markets with a thunderous momentum, Binance is preemptive and vigorously develops its own DEX and public chain. The launch of Binance DEX is the first step for a centralized exchange to enter DEX. Binance DEX and Binance Chain complement each other and also mark Binance Empire’s entry into a new ecological realm.
How effective is the exchange’s entry into the public chain track? Can DEX grab food from centralized exchanges? The explosion of DeFi has tested these well.
As the DeFi boom unfolded on Ethereum, the role of Binance DEX was far less than expected. Binance soon realized the fatal problem of Binance Chain-the inability to run smart contracts and deploy applications.
Starve to death the timid, support the daring to death. Binance made a decision that surprised everyone. Instead of attempting to add smart contract functions to Binance Chain and sacrificing its performance, they decided to develop a chain that runs parallel to Binance Chain-Binance Smart Chain (BSC), aiming to further open the door to the DeFi field.
Looking back on the development of the past year, the reason why BSC under the DeFi wave has come from behind and attracted a large number of projects to migrate to BSC is not something that can be completed overnight, but the result of Binance’s precautions.
No one doubts the absolute status of Ethereum in the blockchain field. With the vigorous development of DeFi in 2020, Ethereum will continue to be “one-of-a-kind.” As the “imitator” of Ethereum, BSC forked the Ethereum virtual machine and launched its blockchain network BSC that supports smart contracts.
However, Ethereum’s expansion problems, cost problems, and user experience have gradually emerged. When users have new choices, Ethereum “naked” its users away.
On BSC, users can experience the composability, high liquidity and good user experience of DeFi at a very low cost. Binance has brought enough liquidity through the largest number of retail investors in the encryption field, and through BSC allows different projects to deploy applications on it to achieve large-scale use. This may be Binance’s “Key to Victory”.
As can be seen from the above table, although Ethereum has a certain advantage in locking the total value, the gas fee of BSC is much lower than that of Ethereum, which is more beneficial to users.
At the same time, Binance Smart Chain has a leading position in the number of daily transactions, average block generation time, and daily active addresses, which are important indicators for measuring network activity. From catching up to side by side, and then surpassing Ethereum, BSC has gained a lot of market share. Relying on a highly scalable network and a rapidly expanding ecosystem, BSC will continue to be one of Ethereum’s main competitors in the future.
The emergence of BSC is of great benefit to the development of Ethereum and DeFi as a whole. Competition will promote the iterative innovation of BSC and Ethereum, and the ultimate beneficiary will be DeFi users.
With the launch of Ethereum 2.0 and the development of Layer 2, Ethereum may regain users. For most users, BSC is still a viable option in the short term. Although BSC has a centralization problem, BSC is faster, cheaper, and more liquid. There is no better choice than this. Of course, Binance must quickly keep up with the pace of innovation in order to have more initiative.
Whether it is the explosion of the trading market or the expansion of DeFi, competition in the encryption field will continue. However, under Binance’s “sufficient effort” posture, it can be expected that Binance Ecology will still maintain a greater advantage in the entire encryption field.
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.