Coinbase valued higher than exchange platform tokens? Summarizing the valuation and influencing factors of 11 platform tokens

Is there still room for the price of platform tokens to rise? Is the price of platform tokens overvalued?

(This article is authorized to be reprinted from PANews, the original title is "Is Coinbase valued higher than other exchanges? We analyzed the valuation and influencing factors of 11 platform tokens," original article here)

In the early morning of April 15th Beijing time, the U.S. compliant cryptocurrency exchange Coinbase officially went public on the Nasdaq exchange, closing the first day at $328, up about 31%, with a market value of $65.3 billion. The intraday stock price reached as high as $429, and the total market value once exceeded $80 billion.

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Even before Coinbase's listing, influenced by the good news of cryptocurrency exchanges entering the traditional financial markets, various centralized exchanges' platform tokens entered an upward trend. According to data from CoinGecko, the average price increase of 53 CEX platform tokens in the past 7 days reached 29.73%, showing strong overall performance.

Is there still room for the price of platform tokens to rise? Is the price of platform tokens overvalued? This involves the valuation judgment of platform tokens. To this end, PAData selected 11 platforms (6 centralized exchange platform tokens and 5 decentralized exchange governance tokens)[1], and discussed the current valuation of platform tokens by analyzing the relative changes in market value and expected income, as well as the main application scenarios. PAData found:

1) So far this year, the average (median) price of platform tokens has risen by 384%, with CEX platform tokens experiencing a higher increase; the average market value (median) of platform tokens has risen by 729%, with DEX governance tokens experiencing a higher increase. The overall performance of price and market value is better than last year.

2) From 2020 to now, 6 CEXs disclosed a total amount of approximately $946 million for repurchasing/destroying platform tokens (if Binance's latest quarterly data is included, this value will reach $1.553 billion). Speculating based on the proportion of repurchasing/destroying funds to total income, the (estimated) total income of the 6 exchanges has reached $4.441 billion (if Binance's latest quarterly data is included, this value will reach $7.418 billion), of which, except for Binance, the (estimated) total income of the other 5 exchanges this year is approximately $949 million (if Binance's latest quarterly data is included, this value will reach $3.926 billion). Speculating based on the fee income of 5 DEXs on April 3rd, the (estimated) total income so far this year is approximately $1.171 billion. CEXs have stronger revenue capabilities than DEXs.

3) From 2020 to now, the average market-to-sales ratios of BNB, OKB, FTT, HT, LEO, and KCS are approximately 8.2 times, 19.6 times, 79.2 times, 10.5 times, 207.6 times, and 14.3 times. So far this year, the average market-to-sales ratios of UNI, SUSHI, 1inch, DODO, and BAL are approximately 19.7 times, 7.9 times, 57.1 times, 188.1 times, and 66.2 times. Calculated based on Coinbase's closing market value and first-quarter revenue, its current market-to-sales ratio is approximately 36.3 times, higher than the average valuation of most CEX platform tokens.

4) For the valuation of CEX platform tokens, changes in market value and expected income have a significant impact, but the sensitivity is not high. When the estimated income growth is more than 3 times the market value growth, the market-to-sales ratio will show a more significant decrease, such as BNB and LEO, where the market-to-sales ratio drops by nearly 50%. For the valuation of DEX governance tokens, changes in market value and expected income have little impact and greater deviation. When the market value growth exceeds the expected income, the valuation still shows a significant decrease. The valuation of DEX governance tokens is more influenced by other factors.

5) The application scenarios of CEX platform tokens are more extensive than those of DEX governance tokens, benefiting from the public chain ecosystem developed by exchanges, and have been used as native assets in a wider range of scenarios.

1. Platform Coins See Average Price Increase of 384% and Market Cap Increase of 729% This Year

So far this year, platform coins have shown significant price increases. The average (median) price increase of 11 platform coins within the observed range has reached 384.34%, with 6 CEX platform coins showing an average (median) price increase of approximately 560.48%, higher than the average (median) increase of DEX.

Among them, KCS and BNB have seen significant price surges this year, with price increases of 2594.94% and 1478.87%, respectively. As of April 12th, their prices were $18.6 and $598.6 respectively. Among DEX governance tokens, DODO has shown the highest price increase this year, at around 2244.63%, with a price of approximately $4.7 as of April 12th. The price of other platform coins has also achieved increases of over 100% this year, a performance far better than the previous year.

Due to the significant price increases and the continuous increase in supply of DEX governance tokens, the market value of platform coins has also surged this year. According to statistics, the average (median) market cap increase of 11 platform coins this year reached 729.81%, while the average (median) market cap increase of 5 DEX governance tokens was around 729.81%, higher than the CEX average (median) market cap increase of 511.63%.

Notably, DODO's market cap has surged by 12245.33% this year. Additionally, UNI has also seen a market cap increase of over 1000%, with their current market caps reaching $530 million and $15.52 billion respectively as of April 12th. Among CEX platforms, KCS and BNB have seen market cap increases of over 1000%, with current market caps of approximately $1.47 billion and $80.3 billion respectively.

2. CEX Platform Coin Value Originates from Burns, $219 Million Disclosed This Year

This year, the average (median) market cap increase of 11 platform coins has exceeded the average (median) price increase, largely due to the continuous distribution incentives in DEX, which is related to increasing the supply. In fact, CEX and DEX platform coins have completely different token model design logics. From the circulating supply changes of some platform coins as per glassnode statistics, CEX platform coins are mainly deflationary, while DEX governance tokens are mainly based on constant total supply.

CEX achieves deflation by using a certain proportion of income/profit to repurchase and burn circulating tokens or team-locked tokens, thereby continuously reducing the total supply. According to statistics from PAData, the total amount of platform coins repurchased by different exchanges accounts for approximately 10%-30% of income/profit, with FTX being higher, repurchasing about 1/3 of monthly trading fees, and Kucoin being lower, repurchasing about 10% of monthly profit. Moreover, a recent trend has emerged where CEX attempts to accelerate the deflation process through other supplementary burn plans, such as Binance's "Burn Back Program" and OKEx's Welfare Burn Program. CEX aims to increase the appreciation speed of platform coins through this.

According to PAData statistics, since 2020, the total number of platform coins repurchased/burned by 6 CEXs is approximately 131 million coins, equivalent to a total value of about $946 million. The disclosed repurchase/burn total for this year is approximately $219 million. Based on the proportion of repurchase/burn funds to total income of different exchanges, the (estimated) total income of 6 CEXs has reached $4.41 billion. As of April 13th, the (estimated) total income achieved by the other 5 CEXs this year is approximately $949 million (Binance has not disclosed first-quarter burn data within the statistical period).

Considering data integrity, observing the actual revenue situation of each CEX based on last year's repurchase/burn situation, we can see that Binance had the highest total repurchase/burn of platform coins, around $34,700, equivalent to (estimated) revenue of $1.734 billion. Following, Huobi's repurchase/burn of platform coins also reached $267 million, equivalent to (estimated) revenue of $1.333 billion. Meanwhile, OKEx, Bitfinex, and Kucoin had (estimated) revenues of approximately $325 million, $195 million, and $24.079 million respectively.

3. Market Shows Insensitivity to CEX Platform Coin Valuation Changes, Greater Deviation in DEX Governance Token Valuation

As the revenue situation of CEX is directly linked to the total repurchase amount, and the revenue situation of DEX can be directly reflected through on-chain transaction data, platform coins have become a token form closest to traditional stock concepts, providing the possibility to use traditional valuation models to assess platform coin value.

According to the price-to-sales ratio model, the market value of platform coins divided by the estimated total revenue for a certain time period is used as a standard measure of valuation. Generally, the lower this value, the more undervalued the target is considered, and vice versa.

Based on statistics, the average valuation of 6 CEX platform coins since 2020 ranges between 8x and 207x, showing significant differences. Among them, BNB and HT have the lowest average price-to-sales ratios, at 8.2x and 10.5x respectively. Conversely, LEO has the highest average price-to-sales ratio, exceeding 207x. Looking at trends, BNB's price-to-sales ratio is decreasing, while OKB, HT, and KCS remain relatively stable, and FTT continues to rise, reaching 245x.

Observing the factors affecting the change in price-to-sales ratio of CEX over a complete data period, it can be seen that changes in market value and expected income have an impact on valuation, but with low sensitivity. When the expected income growth is more than three times the market value growth, a significant decrease in price-to-sales ratio will occur, as seen with BNB and LEO, where their price-to-sales ratios dropped by nearly 50%, indicating they were undervalued. If the expected income growth is less than 1x the market value growth, whether the market value and expected income are in positive or negative growth status, the valuation of platform coins only drops by less than 20%.

The average price-to-sales ratio of 5 DEX governance tokens this year is generally close to that of CEX platform coins, ranging from 8x to 188x. Among them, SUSHI has the lowest average price-to-sales ratio this year, at only 7.9x, while DODO has the highest price-to-sales ratio this year, around 188.1x. In terms of trends, this year, except for UNI, the price-to-sales ratios of the other 4 tokens have shown a significant upward trend.

However, unlike CEX platform coin valuation, changes in market value and expected income have a very small impact on the price-to-sales ratio of DEX governance tokens, with greater deviation.

Notably, there are cases where valuation still significantly decreases when the market value growth exceeds expected income, such as UNI, where the recent market value increase was 77.64%, while the expected income increase was only 24.56%, yet UNI's price-to-sales ratio dropped by 58.71%. There are also cases where the price-to-sales ratio significantly increases when market value growth is similar to expected income growth, such as BAL, where the recent market value increase was 63.06% and the expected income increase was around 61.87%, resulting in a substantial 123.71% increase in the price-to-sales ratio. This may indicate that DEX governance token valuation is more influenced by other factors.

4. Platform Coin Application Scenarios Broadening Further

Price-to-sales ratio is a retrospective valuation analysis, and the long-term value of platform coins still depends on the breadth and depth of their application scenarios.

Overall, the application scenarios of CEX platform coins are currently more extensive than those of DEX governance tokens. According to incomplete statistics from public data, the main uses of platform coins currently are for trading and equity certificates, both of which are closely related to the exchange's trading and derivative businesses. However, it is worth noting that several platform coins have been applied to other ecological scenarios, either as native assets of public chains developed by exchanges, or applied in their own ecological scenarios.

For instance, HT, KCS, and OKB have expanded external cooperation channels, where HT can be used on platforms like Travala.com and C5Game gaming platform, while OKB can be used on platforms like Tripio and Firmachain. HT and BNB are also deeply applied as native assets of public chains within the HECO and BSC ecosystems. These wide-ranging external or internal application scenarios further empower the value of platform coins.

In comparison, the value source of DEX governance tokens is relatively singular, with its main uses being rewards and governance certificates. For example, UNI's main function is to provide rewards to liquidity providers and compensate for impermanent losses, while also serving as a governance certificate, allowing participation in Uniswap's governance rights, such as UNI community treasury, protocol conversion fees, and governance of SOCKS liquidity token issues. Thanks to DeFi's composability, DEX governance tokens are usually widely used as assets in various other DeFi applications. In this respect, the application scenarios of DEX governance tokens are quite similar to CEX platform coins.

Data Explanation

[1] The selection criteria for the observed objects are: selecting 6 CEX platform coins based on market capitalization and market volume, namely BNB, OKB, FTT, HT, LEO, KCS; selecting 5 DEX governance tokens based on locking amount and market volume, namely UNI, SUSHI, 1inch, DODO, BAL.

[2] Due to data gaps in FTX, there is a larger margin of error, so it has been excluded from the analysis.