From Metrics to Market: Assessing the Real Financial Impact of Leading Exchanges

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Estimating the Market Capitalisation and Virtual Value of Leading Crypto Exchanges

As a seasoned researcher with over two decades of experience in the financial sector, I must admit that delving into the world of cryptocurrency exchanges has been quite the rollercoaster ride! The ever-evolving landscape of this dynamic market calls for a unique blend of traditional financial analysis and an open mind to new trends.

Have you ever wondered what your favorite cryptocurrency exchange is actually worth?

Most crypto platforms are private companies, meaning they are not publicly traded. However, one exception is Coinbase, whose net worth is publicly available.

This situation prompts the curiosity: is it possible to determine the worth of other cryptocurrency trading platforms by measuring them against Coinbase, considering its publicly known valuation?

For the first time, this analysis delves into the methods used to tackle this question, employing precise mathematical calculations and a thorough evaluation of both tangible and intangible factors.

The information presented here, along with the foundation for the Exchanges’ Trust and Value Index, remains significant, given that it pertains to a date as recent as November 20, 2024.

Ratio-Based Evaluation of Cryptocurrency Exchanges’ Virtual Capitalisation

As of November 20, 2024, Coinbase’s market capitalization stood at $81.26 billion.

In the realm of crypto news, renowned author Tom White proposed a unique strategy for evaluating a term known as the Virtual Capitalization of cryptocurrency trading platforms. This method determines ratios using vital statistics that best represent the exchange’s value in comparison to Coinbase. The essential factors considered are:

  • Average daily trading volume

  • Web traffic

  • User count

  • Exchange token’s market capitalization

The study will utilize this equation by focusing on seven significant cryptocurrency trading platforms, which differ in terms of their scale and estimated worth.

  • Binance

  • Bybit

  • OKX

  • Kraken

  • WhiteBIT

  • Gate.io

By collecting information and analyses from platforms like CoinGecko, CoinGlass, SimilarWeb, as well as declarations directly from the trading platforms, we’ve put together these key findings:

For each transaction, a specific metric will be chosen to calculate its individual worth, providing an approximate value range as a result.

The final calculations yield the following results:

Exchanges’ Trust and Value Index

While arithmetic metrics may be sufficient to estimate an exchange’s virtual value, the true essence lies in trust and overall value.

To offer a broader viewpoint regarding a market’s standing for an exchange, we’ve introduced the Exchanges’ Trust and Value Index (ETVI).

The Analytical Framework for Exchange Assessment, developed by The Exchanges, serves to evaluate not only the financial resilience but also the reliability or trustworthiness of a trading platform.

In simple terms, the Index methodology employs a scoring system that goes from 1 to 10. A score of 10 indicates the maximum rating, while a score of 1 means the lowest possible rating.

The evaluation is based on six key metrics: transparency, activity, capital, security, compliance, and proof of reserves.

In the “Exchanges’ Trust and Value Index,” the Transparency metric evaluates the level of openness exhibited by an exchange, focusing primarily on the clarity with which it shares its financial standing, operational details, and decision-making procedures.

The activity of a cryptocurrency exchange platform is evaluated to determine its organic visitor count and user base, offering crucial insights about its functional efficiency. This measurement is calculated by combining self-provided audience details and web traffic analytics.

As a crypto investor, I measure the robustness and ease of access to funds for a digital currency exchange using the Capital metric. This assessment is derived from considering the overall trading volume and the number of active futures contracts, known as futures trading open interest (OI).

Security evaluates how effectively a cryptocurrency exchange safeguards user funds, data, and platform integrity. This metric considers anti-money laundering (AML) practices, compliance with the Cryptocurrency Security Standard (CCSS), the exchange’s history of security incidents, and asset custody protocols.

Compliance measures how well a cryptocurrency exchange adheres to legal and regulatory requirements. It is assessed based on the legality of its operations, adherence to sanctions compliance, and integration of Financial Action Task Force (FATF) frameworks.

Results: 

When evaluating cryptocurrency exchanges using the Index, clear differences become apparent.

Regarding openness, platforms such as Binance, Coinbase, and Kraken openly share details about their senior leadership and proof of assets for all to see. On the other hand, exchanges like OKX uphold transparency by undergoing external audits or forming collaborative partnerships with strategic entities.

In terms of user activity, Binance stands out with more than 200 million active users and high web traffic. Coinbase comes in second place with approximately 73 million users, while Bybit trails behind with around 10 million. WhiteBIT, despite being smaller, boasts a commendable 5 million users.

The amount of capital being handled and exchanged on these platforms differs quite a bit. For instance, Coinbase, OKX, and WhiteBIT all report similar daily trading volumes (approximately $6 billion for Coinbase, $5.4 billion for OKX, and $5.1 billion for WhiteBIT). Nevertheless, Binance and Bybit lead the pack with an impressive $31 billion and $7 billion in daily trade volume respectively.

In other words, following the rules set by the Financial Action Task Force (FATF) is a significant point that sets these platforms apart. Notably, Coinbase follows U.S. regulations particularly stringently.

When it comes to the disclosure of reserve proofs, WhiteBIT chooses to undergo third-party audits but prefers to keep its reserves confidential for security purposes. Conversely, platforms such as Binance, OKX, and others prioritize transparency by making their reserves publicly accessible. Lastly, Bybit, Kraken, and Coinbase offer customized access to their reserves to individual users.

What the Exchanges’ Trust and Value Index Means for Crypto Exchange Value

The findings from the Trust and Value Index of various Crypto Exchanges indicate that a crypto exchange’s worth encompasses more than just basic mathematical comparisons.

Confidence, or trust, is equally important as liquidity when considering this index, as it doesn’t just gauge the monetary value of a trading platform, but also assesses its long-term viability and the faith users have in it.

Ultimately, a platform’s worth extends beyond mere numerical values. It is influenced significantly by its existing status as well as its prospects for thriving or facing challenges in the coming times.

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2024-12-19 23:14