Binance Coin least profitable exchange token, OKB most for Q2
Now, it seems like every exchange has issued its own token. From Binance Coin to FTX token, the top-coins on Coinmarketcap are littered with several exchange tokens, many of which have been issued in the past 12-months. As far as their recent performance goes, they haven’t been outshining the larger cryptocurrencies.
According to the recent quarterly report from CoinGecko for Q2 2020, while the top exchange tokens saw an average growth of 20 percent, market activity across the board shows investors are growing more hesitant. The report looked at “centralized exchange tokens” from top spot and derivatives exchanges, namely Binance Coin, OKB, Huobi Token, LEO, and FTX Token.
In Q2 2020, market capitalization of exchange tokens moves in commensurate pace with the larger market. This stat is significant because not only do the altcoins only hold 36 percent of the market capitalisation but of that 36 percent, 10 percent is held by Ethereum. Further, ETH saw a 1.6 percent increase in its holding in the recent quarter amounting to $4.3 billion. Bitcoin, despite its quarter-on-quarter price growth, added 0.3 percent to its market capitalization in the past three months.
Exchange token quarterly performance | Source: CoinGecko quarterly report
From Q1 to Q2, exchange tokens’ market cap increased by 24 percent while its trading volume decreased by 10 percent. This difference, as CoinGecko put it, was down to investors becoming “more careful,” and whales becoming ‘HODLers’. The report read,
” The downtrend in the trading volume may be a signal that investors were more careful with their trading or there were more retail participants who trade a minimal amount of coins while the whales may have been practising HODL.”
The investors to whales comparison was further emphasized in the trading volume analysis for the exchange tokens. Huobi Token saw the biggest drop in trading volume with over a fifth of its volume decreasing, while LEO saw the biggest gain of 66 percent.
In terms of price, OKB had the highest return of 90 percent, while the highest valued token, Binance Coin, rose by 12 percent in Q2. It should be noted that only one token within this period saw temporary negative returns – LEO.
Perhaps the most interesting finding of the report was the direct relationship between the token price and supply burnt. Among the top-5, the tokens with the highest burn rate [in Q2] saw the highest price change between quarters, as the report argued correlation but not direct causation,
“Price change seemed to be directly correlated with amount burned, though it appears that there are diminishing returns. Note that many other factors may also influence price movement.”
It should be noted that exchange tokens are influenced by two major factors – Bitcoin and their parent exchanges. For Q2 2020, Bitcoin saw a massive recovery from $5,500 to over $9,000, but for the better part of the period, it was stuck trading in a tight range with little volatility, with exchange-trading volume decreasing by the day from May.
Exchange tokens are a mainstay of the current cryptocurrency market, it seems their performance is simmering relative to the larger cryptocurrencies, and investors are getting attuned to their unique system of exchange-related demand and exchange-related supply.