Token Analysis (BNB) — Binance growth and adoption indicates an intrinsic valuation of $22.80

On the 11 September 2018, Picolo Research released a Secondary Token Research Report on Binance. View the full report here.

Binance paves the way for further upside led by increasing market share and user adoption

Binance started in Jul 2017 and is an exchange platform for crypto to crypto transactions. It is one of the largest exchanges by trading volume, serving over 350 token pairs for trading.

Company overview

Binance was initially incorporated in China but has recently shifted their headquarters to Malta in favour of its crypto friendliness. The exchange boasts a matching engine that can perform 1.4m transactions per second (TPS) and is known for its high liquidity. Behind the platform is a professional team of 400+ employees with an influential CEO Zhao Changpeng at its helm.

Binance is primarily an altcoin focused exchange, differentiating itself from Coinbase, Bitmex and Bitforex. The platform averages $1b trading volume per day, has over 9m userbase worldwide, and recently surpass Deutsche bank profits in Q1. The platform also announced a $1b social impact fund to foster the growth of blockchain industry and is continually innovating together with its community.

Thematic Views

Higher adoption through organic growth and reputation. Binance has gained a significant foothold in the digital asset exchange sector since its inception. It has continuously retained the top 3 positions as an exchange with the most traded volume globally with an average of $1b per day. The platform has developed itself as one of the major players in the crypto to crypto exchange sector and has built a strong brand name in both the demand and supply side, naming it as one of the most sought-after exchanges for listing. The exchange also dictates one of the best referral programs in the market (40% max commission), as compared to Huobi (30%), OKEx (Adhoc referral program), and Bibox (20%). Binance’s reputation coupled with the steady organic growth of users could translate into sustainable long-term success.

Binance gaining an increased market share of overall trading volume. Even though total market cap and trading volume has dropped significantly (-70% YTD), Binance trading volume has been consistent around the $1b mark. Its market share of trading volume for both BTC and ETH has increased from 2.4% to 6.9% and 2.9% to 6.1% respectively since Jan 2018. We see a continuation of this trend going forward as we expect Binance to capture 10–15% of the market’s trading volume.

Innovative drive to improve exchange features and product offerings. Binance has consistently been at the forefront of providing better user experience of their services. In Aug 2018, the exchange revealed an MVP of its decentralised exchange (DEX) platform, which is a core component of their business strategy to provide a hybrid exchange ecosystem. In addition, the firm made its first acquisition in Trust Wallet to support its DEX platform. There are several other features that Binance had rolled out within the past year, which includes Binance Labs, Binance Info and Binance Academy.

Competitor Analysis

There are many competitors in the exchange sector. We have identified two projects that portray significant similarities to Binance for its competitive landscape.


We adopt a two-prong approach to the valuation of BNB. First, fundamental value is derived on the basis of token discounts and token repurchases that will occur going forward. We forecast an implied quarterly growth rate of 27.8% in trading volumes and utilise Nasdaq as a competitor to calculate an implied profit margin based on its operational costs. We further assume a quarterly discount factor of 11.6% (55% annualised) typically used by VCs, indicating an intrinsic valuation of $27.08.

Second, a relative valuation approach using a dataset of comparable exchanges was adopted to derive an average Market Value/Volume multiple (MV/Vol), estimating the token price at $18.50.

An average of the two valuation approaches was taken to derive a value of $22.80 per BNB token.

Key Risks

  • The utility of BNB tokens are heavily skewed to decisions made by the management, as token holders do not hold any rights to these decisions
  • Stiff competition between exchanges with some offering over 100% cashback of trading fees to penetrate the market
  • Regulatory changes and uncertainties create headwinds


In conclusion, Picolo Research presents a ‘Buy’ rating on Binance with a target price of $22.80, which represents a 139% upside potential. We believe that Binance will continue to reign the top few spots within the exchange segment as it continues to capture a greater market share of the entire trading volume. In addition, the positive outlook on altcoin trading volumes will provide a medium-term catalyst for our price target.

Overall, for the reasons listed below, Picolo affirms its rating:

  • Greater adoption of userbase through organic growth will prove to be sustainable in the long-term
  • Binance market share of overall trading volume has been increasing YTD steadily
  • A plethora of opportunities that could be explored including corporate accounts, custodians, fiat to crypto services, which in turn could provide greater utility for token holders
  • BNB offers decent risk diversification for heavily skewed BTC/ETH portfolio given its lower correlation among the major coins

Not withstanding the above, Picolo acknowledges the short-term weakness in the current markets, but we are optimistic that trading volumes on Binance will not be heavily affected. Furthermore, our analysts have taken a conservative approach in our valuation model and could become cautious if there are significant changes made to the utility value of the token.

In light of the preceding, we recommend a ‘Buy’ rating given our favourable outlook on Binance Token.