I often see the question asked (looking at you, Reddit!), will KCS reach BNB's price? Both Kucoin and Binance are widely used exchanges in a burgeoning crypto industry whose rapid and exponential growth will be fueled by increasing mainstream and institutional adoption. While that may be true, comparing their prices or market caps requires a closer look at the numbers. I'll attempt to do that here.
These four exchanges represent 4 of the top 5 in terms of trading volume, as listed by coinmarketcap.com. I'll be quoting information from there.
Binance, CoinbasePro, and Kraken are the top 3 exchanges (in that order), with Kucoin coming in at #5. CoinMarketCap has assigned them a composite Exchange Score, based on several factors like web traffic, liquidity, and volume. Binance dominates the field with 9.8 rating (out of 10), while the other three range from 8.3 (Kucoin) to 8.9 (CoinbasePro).
In addition to being exchanges, Binance and Kucoin have their own coins. It's important here to differentiate between numbers for the exchange and numbers for the coins so we don't compare apples and oranges. While Binance has over $65.6 Billion in exchange volume, Kucoin only has $3.6B, or about 5.54% of Binance's trading volume. Kraken would seem to be a much better comparison to Kucoin in terms of trading volume at $3.9 billion.
The Hope
KCS's current price is about $12.50 while BNB's is $663, so 1 KCS is worth 1.89% of a BNB. This would seem to suggest that, to the extent that the price of a coin is related to the trading volume of its exchange, there could be serious room for growth for KCS. If KCS was worth the amount that represented its share of BNB's trading volume (5.54%), KCS's price would be about $36.75.
That number was determined by multiplying BNB's current price by the quotient of Kucoin's exchange trading volume divided by that of Binance ($663 * 5.54% = $36.73). It can also be verified by comparing the price of KCS to Kucoin's exchange trading volume and the price of BNB to Binance's exchange trading volume. The KCS / Kucoin exchange trading volume ratio is 34% of BNB / Binance's. KCS's current price of $12.50 divided by 34% is $36.79.
So to the extent that we think the price of the coin is based on its exchange's trading volume, the price of KCS should triple just to catch up to BNB.
For anyone wondering, BNB's trading volume is about 8.3% of Binance's exchange trading volume, while KCS's trading volume represents about 1.3% of Kucoin's exchange trading volume. If KCS's trading volume reached a similar percentage of its total exchange trading volume, perhaps it could go up by a multiple of 6! (8.3 / 1.3 = 6.3846..)
The Reality
The trading volumes of KCS and BNB (rather than those of their respective exchanges), however, tell a different story. KCS has a daily volume of about $47 million while BNB has a trading volume of almost $5.5B, meaning that KCS has about .86% of BNB's trading volume, which could suggest that KCS is overvalued.
Comparing the market caps of the coins, Kucoin market cap of just over $1B represents just under 1% of BNB market cap of over $100B.
When comparing market caps, it's important to look at the Fully Diluted Market Cap. While the market cap is based on the circulating supply of a coin, the fully diluted market cap represents what it would be if the total supply of coins were released and valued at the same price. The market is effectively taking into account (though I'm not the biggest fan of efficient market theory...) increasing supply of coins, where applicable.
This is important because some coins can have rampant and unlimited inflation while some are inherently deflationary. To the extent you're using crypto as a hedge against inflation, you want to take this into account.
CoinMarketCap defines Market Cap as "The total market value of a cryptocurrency's circulating supply. It is analogous to the free-float capitalization in the stock market." and Fully Diluted Market Cap as "The market cap if the max supply was in circulation. Fully-diluted market cap (FDMC) = price x max supply. If max supply is null, FDMC = price x total supply. if max supply and total supply are infinite or not available, fully-diluted market cap shows - -."
Anyway, my exciting spreadsheet analysis did have a point, leading me to the most interesting comparison:
TLDR;
Comparing the fully diluted market caps of KCS and BNB tells us that KCS represents precisely 1.89% of BNB's market cap, which (coincidentally?) is the exact same percentage you get when comparing their prices.
MotherF'ing Voilà:
KCS's Fully Diluted Market Cap of $2,135,787,056 / BNB's of $112,842,997,704.00 = 1.89%
KCS Price of $12.50 / BNB's price of $663 = 1.89%
Now I did round and the numbers are constantly changing, but it's probably more than a coincidence that the price ratio seems to correlate so closely with the ratio of their fully diluted market caps. Efficient Market theory would seem to suggest that Kucoin's price is right where it should be relative to BNB.
So which is burning coins faster? I'm not sure, but I'm investing in both.
