From BNB & UNI to AAB: Exchange Tokens 101
In this article, we will be looking at centralised exchange tokens. Centralised exchange tokens are the native token of a centralized exchange. Centralised exchanges are a type of cryptocurrency exchange. There are many cryptocurrency exchanges, with 474 listed on CoinGecko.
Out of these, 77% of the exchanges are centralised (365 exchanges) with only 23% being decentralised (109 exchanges).
Users hold and use centralized exchange tokens for a variety of reasons. In this article we will look at the benefits of these tokens, the centralised exchange token market and common themes seen from centralized exchange tokens.
There are two types of exchange tokens. These are CEX tokens (centralised exchange tokens e.g. BNB & AAB) and DEX tokens (decentralised exchange tokens e.g. UNI & SRM). In this article we will be looking at centralised exchange tokens.
CEX tokens typically share a few common base features such as:
- Lowered trading fees when using the token to pay for trading fees e.g. AAB 20% fee discount when used to pay for fees on AAX.
- Burn feature e.g. CRO 10% monthly burn.
- IEO / airdrop features for holders e.g. holding GT allows Gate.io users to participate in exchange IEOs dependent on the amount of GT held.
- Liquidity buybacks e.g. Huobi will use back some earnings from transaction fees to buy back HT.
What constitutes a centralised exchange?
Centralised exchanges are places which allow users to buy and sell cryptocurrencies. They also allow for users to store their cryptocurrencies with the exchange. Centralised exchanges ask for a form of identity verification before allowing you to transfer fiat into cryptocurrencies.
CEX tokens are the native tokens of these exchanges.
Do all centralised exchanges have CEX tokens?
There are many centralised exchanges, however not all of them have a CEX token. For example the following exchanges do not have a CEX token:
However many exchanges do have a CEX token such as:
- Binance (BNB)
- Okex (OKB)
- Huobi (HT)
- Gate.io (GT)
- KuCoin (KCS)
- Hotbit (HTB)
- AAX (AAB)
The CEX token market
In the CEX token market there is one clear dominant CEX token - BNB.
BNB has a market capitalization of $62,425,323,916 and is currently ranked as the fourth largest cryptocurrency, behind only BTC, ETH & USDT. To put this into context BNB is x14.25 larger by market cap than the second largest CEX token OKB. Additionally BNB is x7,421 times larger than the native AAX CEX token AAB.
When looking at the market as a whole, BNB currently makes up 83.9% of the total CEX token market capitalization.
What type of tokens are exchange tokens?
Like most tokens in the cryptocurrency market, typically exchange tokens are ERC-20 tokens. In the chart below you can see that most CEX tokens are ERC-20*.
*ERC-20 PM = currently an ERC-20 token however there is a planned migration.
|Cryptocurrency||Token type||Blockchain used|
|BNB||BEP-20||Binance Smart Chain|
How have exchange tokens performed so far in 2021?
During the 2021 bull run there has been a clear demand for low market cap CEX tokens. The only outlier from this statement is BNB. As is shown below, we can see that low market cap CEX tokens such as AAB & KCS have performed very well, both increasing more than 1250%. However tokens with a planned migration & larger market caps have not performed as strongly, with CRO & OKB increasing by just over 200%.
|Coin||Price 01/01/21||Price 07/06/21||% increase||CEX token rank (by market cap*)|
What does the short term future hold for CEX tokens?
CEX tokens are heavily influenced by negative BTC moves. Previously not all CEX tokens were, with the outlier previously being AAB. However, since AAB has been listed on Uniswap it has seen increased correlation to BTCs movements.
BTC in the short term is still looking bearish. The 4hr, daily and weekly indicators all look bearish. Therefore it is expected that CEX tokens will lose some of their yearly gains in the coming weeks. However, the cryptocurrency bull run looks unlikely to be finished. BTC is expected to make major moves again. If this occurs CEX tokens will follow.
What does the long term future hold for CEX tokens?
Some within the cryptocurrency space believe that the emergence of decentralised exchanges will render the centralised exchange obsolete. However, both have their positives and negatives. Demand is expected to increase for both in the coming years as the cryptocurrency market continues its high growth rate.
- Read more about CEX vs DEX
The demand for CEX tokens will vary, while the tokens themselves are becoming increasingly dissimilar.
For example the Gate.io token GT revolves around allowing users to take part in the Gate.io ICOs. Therefore, the performance of this token will likely depend on the demand for ICOs unless Gate.io changes their GT strategy.
CEX cryptocurrency CRO is focusing on bringing value through staking and the need for users to lock up their CRO in order to receive their crypto.com card. Additionally they are attempting to bring value to CRO through implementing an aggressive burn feature. The demand for CRO will likely depend on the need for cryptocurrency cards and the sentiment surrounding CRO in comparison to competitors such as SXP.
Over the coming weeks, it will be interesting to see how competition between CEX tokens will play out.
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