Overestimated or Underestimated? A Comparative Analysis of BNB, KCS, UNI, SUSHI
I entered the crypto market in 2017 and witnessed the successive births of Binance, KuCoin, Uniswap and Sushiswap. I hold all these exchange tokens and they each have their own strengths. From 2020 to 2021, BNB, UNI, SUSHI all have good gains and broke new historical highs, but the KCS I hold has been hovering at a low price for a long time. I wonder if I chose the wrong one or KCS is underestimated, so I have this analysis. Through data comparison, I found that KCS is expected to become one of the best performing currencies in 2021.
Trading Volume and Exchange Token
As an exchange, whether it is CEX or DEX, trading volume is the most intuitive indicator of its value. According to the data on February 7, 2021, Binance is undoubtedly the world’s biggest exchange. Uniswap’s trading volume is about 5% of Binance’s. KuCoin and Sushiswap’s trading volume is about the same, which is about 2% ~ 3% of Binance. I believe that the trading volume of several exchanges is real.
Next, let’s take a look at the market cap of the exchange token of these exchanges. It can be seen that BNB also takes the lead. The market cap of UNI is about 52.5% of BNB, SUSHI is about 15.6%, and KCS is only 2.5%. Taking into account the difference in valuation methods between CEX and DEX, DEX is a hot spot nowadays and has a considerable DEX Premium (we will analyze it later), so here we will mainly analyze BNB and KCS.
As you can find in the chart below, the crypto market has surged a lot in the past 12 months, and the trading volume of Binance and KuCoin have both increased well.
Comparing the trading volume of the whole year, the trading volume of KuCoin is about 3.2% of Binance’s, and the current market cap of BNB is 10.4 billion.
The reasonable market cap of KCS: 10.4 billion * 3.2% = 334 million
The current market cap of KCS is 140 million, which means that there is about 2.4 times the space from the reasonable market cap. Then:
Reasonable price of KCS: 1.75 USDT * 2.4 = 4.2 USDT
With this calculation, do you agree with me that KCS is greatly underestimated?
Crypto Contract and KCS Bonus
Someone may refute me that such an analysis is not reasonable, because exchanges like Binance and KuCoin not only have spot trading but also contracts trading. Among the top 10 exchanges in Coinmarketcap, FTX’s spot trading volume is similar to KuCoin’s, but its derivatives products have developed well, so the market cap of FTT can reach 10 times that of KCS.
Indeed, the crypto contract is a new battlefield for CEX in 2020. From the perspective of trading volume, both the Binance contract and the KuCoin contract have a good increase, but I want to point out that due to KCS’s unique KCS bonus plan, the trading volume of KuCoin is more related to KCS holders. To put it simply, the higher the KuCoin trading volume, the more KCS bonus we get every day, and Binance’s trading volume growth does not actually bring any instant benefits to BNB users.
KuCoin will use 50% of its daily revenue to buy back KCS in the market and distribute it to all users who hold more than 6 KCS.
The definition is that simple. However, many people have a misunderstanding. When KuCoin launched the KCS bonus plan, it had not launched the contract business. After the contract business went online, KuCoin stated that 50% of the BTC-margin contract revenue would be included in the KCS bonus, but the subsequent contracts like USDT-margin contract and ETH-margin contract have not been included in the plan. However, it is likely that KuCoin will include these income in the KCS bonus in the future to enhance the attractiveness of KCS.
If it is included, what impact will it have on the KCS Bonus?
According to the data on February 7th, the total trading volume of KuCoin Futures is about $275 million, while the BTC-margin contract volume is about 20 million, accounting for 7.5% of the total volume. Taking myself as an example, I hold 141,266 KCS , The daily KuCoin Bonus is 97.46 KCS, and the daily Futures Bonus is 2.46 KCS.
If the Futures Bonus are calculated according to the total trading volume of KuCoin Futures:
Adjusted KCS Futures Bonus: 2.46 KCS / 7.5% = 32.8 KCS
In this way, the total amount of daily KCS bonus will increase from 99.92 KCS to 130.26 KCS, and the APR will increase from 25.82% to 33.65%. This number is quite considerable. You must know that in my country, the APR the banks offer is less than 2%. What’s more, while receiving KCS bonus everyday, KCS may also have a good pump.
Premium is a financial term that means that we pay a price higher than the book value of an item to buy it. Why are we willing to pay high prices? It is often because this product is more popular now. This is the case with DEX.
DEX Premium is a word I just created, which means that since DEX is developing rapidly, investors are willing to give the DEX exchange token a higher valuation. Compared to the CEX tokens, the premium can be as high as 11 times. Here is how I calculated.
Binance and Uniswap are the leaders of CEX and DEX respectively. Uniswap’s trading volume is 4.78% of Binance’s; and the market cap of UNI is about 52.59% of BNB. The difference between the two is actually the premium the market gives to the DEX:
DEX Premium: 52.29% / 4.78% = 11 times
In other words, if you are running a DEX and a CEX, the valuation of CEX and DEX exchange tokens may differ by 11 times when the trading volume of the two is equal. Of course, DEX is 11 times higher than CEX.
We use KuCoin and Sushiswap to do a verification. The 24h trading volume of KuCoin and Sushiswap is $497 million and $456 million respectively, which is not much different. However, the market cap of SUSHI is almost 11.5 times higher than KCS, which is not much different from our previous calculation of 11 times. This proves our previous conclusion.
The value of calculating the DEX Premium is that the possibility of DEX launching its own CEX in the future is very low, while most CEXs are developing their own DEX, that is to say, BNB and KCS will be both CEX and DEX exchange token in the future, the DEX Premium will affect them positively as well.
KuCoin CEO Johnny wrote in an open letter that KuCoin’s decentralized trading solution, which I think is likely to be a product similar to Uniswap, will be launched this year. KuCoin’s latest roadmap mentioned that its daily trading volume by the end of 2022 is expected to be $15 billion, of which 10% will come from decentralized trading, which is $1.5 billion, almost 1.5 times the current volume of Uniswap and 3 times that of Sushiswap. Of course, Uniswap and Sushiswap will continue to develop, but the DEX Premium on CEX exchange tokens is still anticipating.
When BNB and KCS can get the DEX Premium, the price of the two tokens will easily reach $700 and $50.
Burn is another “trick” to increase the value of tokens. After all, in the current global inflation, an important reason that Bitcoin can be favored by traditional financial institutions is that its total supply is fixed. If it can be deflation, it sounds even more attractive, and that is exactly what CEXs do to their exchange tokens.
BNB and KCS are very similar. Both tokens have a total supply of 200 million, and both adopt a quarterly burn model. But the reason that makes me more confident in KCS is that its current supply and circulating supply are both lower than BNB, which means that, first, the burning amount of KCS is higher than BNB, and second, the lower circulating amount also makes it easier for KCS to pump.
Why is KCS underestimated?
One of the main reasons is that the KuCoin does not do enough marketing. Behind Binance and Sushiswap are CZ and SBF. I personally think that these two are both technical geniuses and marketing geniuses. Their presence on Twitter can bring a lot of attention and users to BNB and SUSHI. Uniswap is also technology-oriented, but the massive airdrop when UNI was launched impressed the entire crypto world. It is one of the most successful marketing events in 2020!
On the other hand, KuCoin, whether it is Michael or Johnny, is more technical. Their tweets on social media are also formal and conservative. I personally like this style, but not all users like it. The founder was so low-key that there was even less exposure about KCS. I randomly asked some people if they knew what KCS was and how it can be used, but I was surprised.
Almost half of the people don’t know the relationship between KCS and KuCoin. Even if they know KCS, many people don’t know that KCS can pay KuCoin trading fee with a 20% discount and get a daily KCS bonus.
Suggestions for KCS
I have full confidence in the BNB, KCS, UNI and SUSHI that I hold. Though KCS underperformed in 2020, entering 2021, KCS has risen by 130%, especially after the KuCoin CEO published an open letter. The KuCoin Roadmap also gives me more confidence. But to further improve KCS’s value and price, I think KuCoin has the following things to try.
1. Include all contract income into the KCS Bonus plan, and calculate as before, the APR of the KCS bonus can be increased by about 30%
2. Adjust token to be distributed in the KCS bonus plan. At present, KCS Bonus plan is giving away KCS, but few people know that in the initial stage, it is giving away a number of altcoins. I remember I can receive a lot of alts every day, and most alts are rising crazily in late 2017, making my wealth increase rapidly, and selling these alts can bring more trading volume to KuCoin, forming a positive cycle. The current KCS bonus plan breaks this cycle. I think if KuCoin can switch back to the previous model, or distribute BTC, USDT or make it customized, it will greatly boost KCS
3. Combine KCS with POL. POL is the native token of Pool-X, but I think a platform does not need so many tokens. The total circulation of POL is 1 billion, the current price is 0.03 USDT, so the market value is about 30 million US dollars. After the merger of KCS and POL, the market cap and price of KCS will increase by at least 20%
4. List KCS on more exchanges, KuCoin has listed BNB, Binance should also list KCS!
5. Last but not least, do more marketing for KCS!