After our previous Review of Huobi Token, where we took a quantitative approach to valuing Huobi’s native token, HT, against other exchanges’ tokens (BNB, KCS, and BIX), we received several requests for updates and similar analyses. We decided to continue this series because we are extremely optimistic on the future of cryptocurrency exchanges; regardless of Bitcoin’s price, we believe that exchange’s native tokens are bound to increase in price given the fact that exchanges are profiting, no matter whether you sell, buy, or transfer tokens. Therefore, if the cryptocurrency market is here to stay, so are exchanges and their juicy profits.
In the last analysis, Huobi Token (HT) had a volume to market capitalisation ratio of 0.08, which we deemed highly undervalued as our target was closer to a 1:1 ratio. To that extent, we decided to enter long positions – resulting in a 2x gain over the course of a month (not bad in a bear market). HT price action wasn’t all that surprising given the metrics we used, but the exchange’s actions are certainly not irrelevant either, as Huobi increased its marketing efforts, increased its offering on HADAX, launched a billion dollar blockchain fund, and decided to release the Huobi Chain, among other things, adding utility to HT.
May and June Price Action
Now, it is time to consider whether to keep our position open or take our profits where they lie. Last month, we based our decision (almost) purely on the volume to market capitalisation ratio of HT against other exchanges.
In May, the biggest loser of the month was without surprise KuCoin. We believed KuCoin to be overvalued a month ago as its ratio was 6.1 against an average of 1.9 and a median of 0.66 for the competition. Over the course of the month, the ratio decreased by 85.37% and the price of the token by 40%; we believe that KuCoin Shares are now correctly valued, with a 0.89 ratio, the target we set last month.
Concerning Bibox, we did not focus on the BIX token until now due to the low volume the exchange had, and the relative correct valuation it had. Nevertheless, the token price grew by 138%, making it the biggest winner among all exchanges for the period, while its ratio also increased by 40.97%. We believe that the fact that Bibox decided to raise its incentive reward program to 45% (with a possibility to reach 67.5% under certain conditions), has been the catalyst for the growth of the coin’s market capitalisation. However, sitting at 1.03, we think that currently Bibox is correctly valued and will not take a position in it.
Across the spectrum of comparables, Huobi Token (HT) still stands as the lowest valuation based on the ratio, with 0.38, despite Huobi being the second biggest exchange by volume at the time of writing. Over the course of the month, the ratio appreciated by approximately 4.75x which is hardly surprising given the value from where it started. Last month, we set a price target of 10x for Huobi and believe that the token still has room to reach a ratio of 1:1, and will, therefore, maintain our positions and accumulate.
At the other side of the spectrum, we have Binance Coin (BNB) which makes sense given the importance of the exchange within the cryptocurrency world. Its ratio increased by 2.9x during the period, to 1.73 today – far above the median value of 1.01. It means that, going by comparables, Binance is currently overvalued; however, given the strength and reach of the exchange, there is no doubt that investors are entering positions in regards to future prospects of the exchange.
Binance vs Huobi Comparison
What is surprising, however, is the gap between Huobi and Binance, despite both exchanges having similar volume, leading the cryptocurrency exchange market, and having lots of similarities between their proposals and business models.
Binance’s ratio is 4.5 times higher than Huobi’s, despite its volume being higher by 50%. Moreover, when comparing both exchange side by side, in terms of volume and their tokens’ market capitalisation, Binance in the current period has a volume 1.5 times bigger than Huobi, but its market capitalisation is 6.8 times higher. Nonetheless, this gap is closing, as last month the same metrics were 1.7 and 12 times, respectively. However, there is still a lot of room to grow for Huobi to reach Binance’s level.
The rationale behind the gap, in our opinion, is the reach and brand awareness Binance has in comparison to Huobi. For instance, when comparing both exchange’s social media followings, Binance has 13 times more followers than Huobi on Twitter, with 820k against 64k – leading to Binance’s tweets reaching 13 times more people.
This can be explained that during the rise of Binance, Huobi had to cope with the ban of CYN exchanges on the Chinese market, and had to completely review its strategy, by setting up shop in Singapore and concentrating in the region, while Binance pivoted towards the west, positioning itself as a main competitor to Bittrex.
The lack of brand awareness surrounding Huobi in the West, as well as the lack of knowledge of Huobi having a native token, is mainly due to the fact that Binance made several bold moves last year. For instance, while most exchanges did not list Chinese coins in September 2017 due to the Chinese ICO ban, Binance decided to list WTC, which many people wanted to trade, meaning they had to register on the platform. Additionally, they were among the first to develop a referral program – leading to many influencers heavily promoting the exchange and word of mouth spreading. Ultimately, Binance capitalised on the fact that Bittrex, the leading exchange in the West back in the beginning of Q2 2017, couldn’t list any new tokens due to regulatory constraints.
In contrast, during the same period, Huobi had to deal with handling the Chinese ICO and fiat/crypto bans, and had to completely review its business model, and decided to switch their markets by first migrating to Singapore, and secondly by entering Korea and Japan. Therefore, the exchange lost precious time to capitalise on Bitcoin’s bull run, and on the problems U.S. exchanges were facing.
We believe that the lack of awareness surrounding Huobi is one of the primary reasons leading to HT’s undervaluation. However, over the course of last month, the exchange has gained high traction, especially with the use of HADAX, its exchange where voters can vote for their favorites projects (and receive airdrops for doing so), which have been analysed by VCs before being presented to the wide audience.
To conclude, despite being highly bullish concerning cryptocurrency exchanges in the medium- to long-run for the reasons we mentioned in our introduction, based on the metrics presented above, we have neutral views on both BIX and KCS, are bearish toward BNB, and are extremely bullish in regards to HT, despite the token having reached an all-time high of $6 a few days ago.
Given the comparative analysis, we believe that HT still has a lot of room to grow as its ratio stands at 0.38 while the competition is sitting at an average of 1, and it’s direct competitor, Binance, at 1.73. This leaves room for the token to grow in a range of 3x to 4.5x, if volume stays constant.
As always, this is not financial advice. This article is based on personal opinion, and we advise everyone to do their own research on Huobi Token (HT), and check through their official webpage, before investing. Consult a financial advisor if needed.
Disclaimer: We are long HT.