Bitpanda and the BEST Token
Crypto exchanges have become a major player in the blockchain space. Based on a trading volume of $60 billion in cryptocurrencies within 24 hours, a trading fee of 0.25% implies $150 million of revenue. Investors, be they institutional, family offices, professional or retail, rely on exchanges to trade their cryptocurrencies and tokens and to settle transactions. Blockchain projects, on the other hand, rely on exchanges to provide them with the necessary liquidity to reward their investors and to keep their projects funded.
The current financial services industry globally is worth approximately USD 15 trillion out of a global GDP of roughly USD 80 trillion. The blockchain industry vacillates between USD 200 to 300 billion. Currently a drop in the ocean. As business use case and the blockchain platform economy increases with maturing of the space, one can expect a dramatic increase in revenues and profits from the Blockchain economy. The research analysts at Konfidio and Kintaro Capital have done preliminary research that the blockchain economy would grow to between 10 trillion to 25 trillion between 2025 and 2030. One does not need to be a rocket scientist to realise that the profits from value settlement on the blockchain will rise exponentially.
There are plenty of increasingly reputable exchanges in the world largely because most exchanges are spending more energy and money on investor protection and financial regulation. In the US, we have Bittrex and Coinbase. In Asia, we have Huobi, KuCoin and Upbit. In the European market however, there remains no clear forerunner in the industry. Binance does not accept fiat. Kraken and BitStamp have a high BTC/EUR volume on their exchange, but their business and technological development appears to be lagging behind compared to their competitors. There services are limited, coupled with a regulatory grey zone remains and, most telling, they do not have an exchange token.
In our opinion, Bitpanda has the opportunity to reshape the European market. They have years of regulatory experience and brokerage services and they are best placed to open a global crypto exchange. The Bitpanda IEO with their exchange token netted €43.6 million, a new record in Europe. Moreover, they plan to have an IEO launchpad in the future. Thus, if everything goes well, they could become a significant competitor to Binance. They will also be more likely to attract traditionally risk averse, regulatory friendly investors in the wealthy Franco-German economic region
In this article, we take a deeper look at Bitpanda, their BEST token and their IEO. Then, we compare them with their competitors before finally explaining why we as Konfidio Cryptocurrency Research have a positive opinion about this project and its potential.
What is Bitpanda?
Founded in 2014 as Coinminimal GmbH in Vienna, Austria, Bitpanda GmbH began as an European retail broker for digital assets like Bitcoin, Ethereum and Pantos. Their services centered around the Bitpanda Platform: a simple online platform that provides retail brokerage and custodian services of fiat, cryptocurrencies and digitized precious metals.
They seem to have been on excellent terms with Austrian regulators for years. In fact, Bitpanda is registered in the commercial register of the Commercial Court of Vienna, allowing them to offer cryptocurrency trading on their platform. They also have several subsidiaries, which are all registered in the Commercial Court of Vienna and enable them to provide additional services. For instance, Bitpanda Metals GmbH offers trading of precious metals.
Licenses
Furthermore, in April 2019, Bitpanda received a PSD2 payment service provider license from the Austrian Financial Market Authority (FMA). This allows Bitpanda to provide a broader range of payment services to customers, further strengthening their position as a registered cryptocurrency trading platform. Global payments & remittances is a huge profitable business with intermediaries and centralised networks. It is ripe for disruption. Many “Crypto Banks” are merely mimicking the centralised financial services systems with gimmicks like Crypto ATMs and “crypto-wallets” as a “Bank”. This is also being driven by Venture Capitalists who do not understand the technology and the power of Blockchain platforms. Mimicry and Marketing sexiness has been driving Crypto banks and Crypto Wallet Banks mostly without banking licences, MIFID II or PSD2. The crowdfunding of Bitpanda does not suffer from any of these perverse incentives or marketing tomfoolery. (see Kintaro Capital reports due to come out later this year on Good, Bad & Ugly Crypto Banks including new projects like coinsbank.com, Bitwallah, Spot9, Cryptobank.io and others)
Bitpanda Global Exchange
In early June 2019, Bitpanda announced fairly ambitious plan to go global through their Bitpanda Global Exchange. Unlike the original platform, customers can directly trade their assets in the Global Exchange, just like Binance and Coinbase.
At the same time, they also announced the IEO of the BEST token, a platform token which offers discounts on trading fees and privileged access to future services, among other perks. This displays some of the key characteristics of a Utility based Tokenomics model.
Bitpanda is also planning to launch an IEO launchpad in late 2019, for which the BEST token will be necessary. This would place them in a good position to take advantage of the expected boom in Digital Asset Tokens or STOs, the market size of which is predicted to reach USD 5 trillion by 2023.
How the IEO and BEST token work
A total of 1 billion BEST tokens were minted. Half of them (500 million) went into the IEO, while the remainder are held by Bitpanda. (allowing a future fund raising possibilities for the platform) One BEST cost €0.1 with discounts for early participants. The IEO lasted for almost a month from 09.07.2019 to 06.08.2019 and a total of €43.6 million were raised, allowing them to correctly claim that they were the most successful European IEO at the time of writing.
Successful for the founders definitely, for investors not as clear. The price of BEST tokens immediately dropped by 30% in three hours after trading was opened on the Global Exchange. Bitpanda responded in a medium article, mentioning their effort to increase volumes by on-boarding professional liquidity “traders” to the Global Exchange. They also reiterated their confidence in their project and that the price of BEST tokens will rise in the future. In our opinion they could have given a more quantitative analysis on this justification/ belief.
Competitive Analysis
Cryptocurrency exchanges are crowded with competitors. On Coinmarketcap alone there are more than 250 crypto exchanges. The relevant question here is can Bitpanda succeed? Is their strategy well formulated? Do they have qualified and experienced advisors beyond people with marketing and short term trading experience? These are the questions we will answer in more details over the next few months.
In the immediate term, we present a comparison with Binance and Bitfinex, two of the most representative crypto exchanges to give investors and observers some trend and experiential justification:
Outlook for Bitpanda and BEST
After an impressive IEO and an unimpressive launch Konfidio Cryptocurrency Research believe there are plenty of reasons to stay positive:
- Regulatory Compliance: Bitpanda has been working closely with regulators. The company and its subsidiaries are all registered with relevant regulators and they possess a PSD2 license. As digital assets face more and more scrutiny from regulators, Bitpanda’s regulatory experience has an edge over competitors. Investor protection is more secure than non regulated exchanges;
- Structured TRANSPARENT burning mechanism: BEST token’s value increases over time as tokens are burnt regularly. 25% of BEST spent on the Bitpanda platform and Global Exchange will be burnt until 50% of the total BEST supply is destroyed. Similar burning plans exists for other exchange coins like Binance coin (BNB) on Binance, but the burning amount is often arbitrary and quite intransparent, unlike BEST which has a well-structured mechanism with governance oversight;
- Intrinsic value of BEST: BEST token reduces trading fee on the Global Exchange. In addition, the IEO launchpad in the future will also need BEST. Thus, the built in utility of BEST token gives them an intrinsic value, unlike random tokens with questionable (but potential) actual usage;
- Past records: Exchange tokens for the crypto exchanges with a high volume often have a good ROI. In Table 2, we listed four of the best exchange tokens and their return on investment (ROI). We can see that they all have very good returns, especially for Binance coin with a surreal ROI of more than twenty thousand percent. BNB did not actually boom on the first week of trading as well.
Conclusion
Bitpanda has come a long way since finally launching their Global Exchange. Unlike most, if not all exchanges that live within regulatory grey zones, they have worked closely with regulators for years. With such experience and ambition and with clear leadership and the right advisors, Bitpanda could develop a solid competitive advantage to become the go-to exchange for Europe.
The BEST tokens are well structured and well designed with a clear burning mechanism and solid utility value. Past records suggests that the success of an exchange token hinges on the exchange as well. Thus potential success of Bitpanda Exchange could make BEST token the next BNB.
Disclaimer: Kintaro Capital, one of Konfidio’s ventures, is currently holding about 600 k BEST tokens.
Originally published at https://konfidio.com on August 30, 2019.
