Insights on Investing in Exchanges Native Tokens
Although prices have been on a downward spiral these past few days, the DeFi madness is the leading topic driving the narrative of the entire crypto market. After an incalculable number of published content talking about flash loans, sushi tokens, liquidations, collaterals, and value locked, the market has reacted with massive sell-offs across the board. The short term outlook remains mostly bearish for all major cryptocurrencies. Unfortunately, we cannot change the current sentiment, but our intention at IntoTheBlock is to cut through the noise and analyze crypto assets with a data-driven approach that can give investors a different perspective to complement their trading decisions.
Even though there is still a lot to learn about the interesting things happening with DeFi, for today´s article the intention is to dive deep into the analysis of Exchanges Native Tokens. This prominent sector has definitely less media coverage but has been performing quite remarkably this year. So far, 2020 has been very fruitful for exchanges tokens marking major gains overall. Taking positions in these types of tokens can be seen as a diversification initiative within the crypto market.
The highest-ranking exchange token by MarketCap is the BNB, from Binance exchange. Since its launch in 2017, the BNB token has powered the exchange’s position in the retail crypto trading space reaching the top 10 of the most actively traded tokens. Now take a look at some of the YTD performance of these assets: Crypto.com (361%), OKEx Token (98%), Huobi Token (60%), Binance Coin (55%), and Kucoin Shares (30%).
There has been a growing interest in their native tokens, as exchanges found a convenient way to increase liquidity by also providing additional value to their holders, as well as discounts for trading fees. Exchange tokens are typically used to incentivize liquidity from market makers, pay for fees when executing orders, or to power community building operations such as voting for new coin listings.
The interest has resulted in the listing of the native tokens in other exchanges, which helps to increase turnover, distribution, and volume. During this year, more exchanges have made their own native tokens available for trading with Binance, Huobi, KuCoin, Bibox, FTX, and others constantly joining the tendency. The cross-listing fact has helped to reduce the slippage and spreads that the exchanges tokens suffered at their launch phase.
The IEO (Initial Exchange Offering) trend became another reason to buy native tokens. The IEO assets are often available for purchase only for the exchange’s own token holders. By late last year, more than 20 crypto exchanges had launched its own fundraising platform. For example, Binance Launchpad has seen some of the most successful token sales including BitTorrent, Fetch.AI, and Celer Network. This mechanism has provided an effective application and justification for native tokens, bringing new money to the sphere.
Crypto Exchanges are often considered as the drivers shaping the value proposition of the crypto industry as a whole. These platforms have done a great job around market infrastructure and channeling investment capital into the industry, but now exchanges are stepping up their game. Tokenized assets, leverage operations, NFTs, perpetual contracts, options, indices, social trading, and others are some of the initiatives that exchanges are offering as the market evolves. Exchanges are leading a trend of integrating crypto with traditional financial markets, using their tokens as a way to differentiate themselves.
Going further into the analysis of exchanges native tokens, undoubtedly 2020 has been the year of crypto.com´s CRO token. During the second quarter, it was the top performer crypto-asset from the top 20 by market cap. This company aims to become the one-stop-shop for the entire life cycle of a crypto user, from lending, borrowing, trading, earning, and spending with their token at the center of their ecosystem.
At the time of writing, CRO is trading at a price of $0.1462 USD, losing 3.15% of its value in the past 24 hours. This asset has almost $3 billion of market capitalization with a strong daily trading volume ranking number 11 on the most relevant crypto-assets just behind Binance (BNB). Just one week ago, on Sept 1st it peaked at its all-time high level
The tokens airdropped to MCO holders in December 2018 and are now traded on more than 20 exchanges. The CRO holders are certainly happy with the price appreciation of this year. IntoTheBlock´s In/Out of the Money Indicator reveals that 78.37% of addresses (33.79k) holding CRO are making money at the current price of $0.1462. In order to perform this level of On-Chain analysis, ITB reviews any address with a positive balance of tokens, then identifies the average price (cost) at which those tokens were purchased and compares it with the current price.
CRO User Activity has spiked in the past months as interest in crypto has increased during the pandemic. As a confirmation of their good momentum, the company announced last month that the crypto.com app reached 3 million users.
The volatility experienced by the market last week shows an interesting pattern for the CRO Network. In the graphs below, we can see how the number of Daily Active Addresses spiked during the weekend reaching its highest level for the past 30 days. The sudden growth in daily active addresses points to speculation being the main driver behind its network activity.
The Total CRO Addresses with a positive Balance (green line below) is another metric that has increased considerably this year. Definitely, the positive effect of being listed in other major exchanges is something to have in mind while analyzing this type of tokens in the future. So far the CRO can be traded in 20 crypto exchanges worldwide.
To better understand the behavior of the CRO token within centralized exchanges, the new On-chain Flows section at IntoTheBlock is an incredible source of intelligence. Specifically, for Crypto.com we can see below how the Outflows peaked on August 5 as the price was continuously going up. Exchange outflows can signal that traders are taking profits or moving to a different asset.
Another example of a centralized exchange native token is the Huobi Token. Currently, HT is trading at a price of $4.64USD having a 2.68% appreciation for the last 24 hours. This asset has almost $1 billion of market capitalization sitting at a strong number 22 of the most popular crypto-assets).
This token is even being a better investment than the CRO. As we can see below there are 86.26% of addresses (9.94k) holding HT are making money at the current price of $4.64.
Although everything is not good news for HT holders, as the Concentration analysis reveals that Huobi Token is a highly concentrated asset. There are 16 addresses with more than 0.1% of the total circulating supply controlling 97.63% of the tokens. From those, only 3 addresses that own 92.40% of the circulating supply have more than 1%. The biggest one has 67.18% of the supply with 191.97m HT or $870.39m The remaining 2.37% belongs to addresses with less than 0.1% of the circulating supply.
Finally, riding the Defi wave we can see the example of Synthetix Network Token that is used to power the decentralized exchange activity. At the time of writing, SNX is trading at a price of $4.50 USD, losing 5.68% of its value in the past 24 hours. Despite the sudden decrease, the performance during the last 3 months has been impressive, reaching an all-time high of $7.75 on September 1st.
The Large Transactions indicator serves as a means of counterparty analysis, as it tracks transactions larger than $100k, hence giving insights on the activity of institutional players when compared to the total number of transactions and their corresponding volume in the network. During mid-August, the number of on-chain transactions greater than $100k saw exponential growth reaching $92m.
The CRO, HT, and SNX are just some of the exchanges native tokens available for trading, but there are many more. From the standpoint of IntoTheBlock, our intention is to provide valuable data points that show different views and perspectives to better understand and analyze the price.
As the market continues to evolve there will be space and opportunities for investors to take positions in these and other exchanges native tokens. Certainly, it would be very interesting to see what other features does the exchanges include around their ecosystem to foster their token activity. As the market matures, the users will only benefit from these innovations.
