How I try to figure out KuCoin´s worth, call it a price prediction

By Patch | Things of note and other interesting stuff | 7 Jun 2022

If you were like me and have been thinking about whether you want to pull the trigger and join the KuCoin community. I thought I would share some of my thoughts and reasoning that factored into my decision.

KuCoin made for everyone

KuCoin is an exchange that is welcoming for everyone in the crypto sea. Whether you are a big whale or you are like me one of the smaller fishes that is part of the shoal. And that is what I like about it. You get a sense of community. Especially when you take things like the passive income you can get in the form of daily rewards simply by holding at least 6 KuCoins, $KSC. Then you will get a slice from the pie made off of 50% of the daily trading fees.

In a sense the more you use the platform for trading, swapping, lending, staking, and a vast array of other things they also offer. The more you help the community to grow. And the more the community grows, the more you, and I will grow with it. And that is a part that is really appealing to me. I really like community, it is one of the best features here on Publish0x as well, the community. This is the reason KuCoin is known as the people's exchange.

It can be a little confusing at first to separate the KuCoin exchange from the KuCoin token. But hopefully, it will be clear by the context in which it is mentioned. If there is anything that is unclear, please leave a comment and I will try and help you understand. And id clear up the post as well if need be.

The history of KuCoin

This part might not seem as important or interesting as the final reasoning is. But without a proper foundation to base your reasoning on. I feel you might as well just try and build a card house in the air. To put it bluntly, you are probably not very likely going to be able to pull it off. While this part may seem mundane I think it is really important. And it is a good practice to have when you look at a project to try and figure out if it is one you would want to invest in or not.

KuCoin started at the end of 2017. The coin then immediately had the classic spike followed by a rapid fall, this is seen in most projects. This means it has a rapid increase in value, which is followed by an equally rapid decrease in value. The experience I have been able to gain has told me this is often the case because of people who have gotten into the project at an early stage, a presale or whitelist sale as an example.

Looking at the tokenomics of the KuCoin, $KSC, we can see in the section that details the token distribution in the whitepaper, that half of the total coins, or 100M coins, were given to early participants. It is very likely that many of them decided to cash out. At least that would explain the sudden drop in price that we can see in early 2018.

From late 2018 to early 2021 the coin then sits at around $1, and shows very little movement in price at all. This is actually a pretty interesting feat in itself. While it looks like the value of the coin was stable. You have to take into account that in 2020 there was the pandemic crash. By the looks of things that did not impact the coin whatsoever.

Then as 2021 comes around and the bull run that came after the pandemic crash starts the coin really comes into its own. The coin then shoots up a massive 2000%. And it reached a top notation of $27.57 as the end of 2021 was approaching. And so far in 2022, it has been some sharp declines, but all of them have been followed by a rapid rebound. Unlike many other coins that tend to level out a little after a dive. And the price as of today is still an impressive $16.39.

Looking to the future

KuCoin started out with a total supply of 200M tokens back in 2017. But as of 2018, they have conducted quarterly buybacks and burns of the KuCoin token. Each quarter they buy back tokens totaling 10% of the net profit. The goal is to buy back 100M, or half of the tokens, and burn them. While this can seem like a strange thing at first, you might just think they simply should have started with 100M tokens then.

It might same as that at a first glance. But by doing it this way you actually will achieve a very different outcome than if you simply would have started with fewer tokens to start with. Now you have a constant reduction in the number of available tokens. And that puts upward pressure on the price. Which is what you want if you are holding the tokens. This ties back to the classic supply and demand. It also serves as a type of anty inflation.

If we take a look at the burn address they use we then see that the total amount of KuCoins they have burned from the start in 2018 is 23,452,595. 20M of those were in addition to the quarterly burns and was part of the new updater whitepaper that got released recently. In which they detail the allocation of the 90M tokens that were locked up from the start.

What will the future hold for KuCoin?

If we then use this data to try and make a price prediction for the future. We now have a supply of 176,547,405 tokens, worth a total of $2,893,611,968 at today's price. If we then take that value and divide it with the 100M token, which is the supply goal. We get a price of $28.94. That should be the new price if the token supply got reduced down to 100M, as is the goal.

While that only shows the current potential of the coins. It is still a figure that is good to have as an indication. It shows that the coins have a built-in value increase of ~1.77x. We get this by dividing the $28.94 by the price of today which was $16.39.

We can also look at this from a quarterly perspective. If we take the tokens that were bought back, 3,452,595. Remember that 20M was a supplementary burn. And if we divide this amount by the total number of quarterly burns that have taken place, 17 so far. We get an average of 203,094 tokens being burned every quarter. IF we then see how large part that is of the 76,547,405 tokens that still is remaining and waiting to be bought back and burned. We then get 0.00265, this is on average how large part of the 76M+ tokens that get burned every quarter.

That number we can then multiply by the 1.77 that we got earlier to see what the quarterly increase in pressure is. It comes out to ~0.0046. This means that we should expect the burns to cause a quarterly increase in the price of 1.0046x. While this will not make you a millionaire overnight. It is definitely not something that should be disregarded.

The uncertain factors

I would consider the quarterly burning of tokens to be a straightforward thing. As there is little outside interference, that value should be as close to as guaranteed as well can get. But as you saw the impact in value from the burning alone is fairly small. And just burning some tokens can not alone cause a 2000x to happen. Like it did in 2021.

That means that there is something else that is affecting the price of the token. And that is where we come to the uncertain parts. And that uncertain thing often gets summed up simply as "potential". People see a potential for growth, so they invest, hoping that the potential they have seen will be realized.

Let us see if we can find some factors then that can affect the potential of the KuCoin. Around a month or so back KuCoin announced that they held a 150M pre-Series B funding round. This means that people and companies had an opportunity to invest in KuCoin. And It is a good way for a company to tie other companies to you. Because if they have invested in you, then they have a vested interest in that you are doing good so they can get a good return on their investment.

And if we look at some of the companies that did partake in this funding round we see names such as Circle Ventures, IDG Capital, and Matrix Partners. That alone tells me that they see potential in the new venture.

This also put the value of the company over the 10B mark. And yes that is B as in Billion. While the coins are not an stock. There is a correlation between the value of a company and the perceived potential of the coin. If we then look at the current total value of the tokens; $2,893,611,968. We can then see that this is pretty far from the $10,000,000,000 the company is valued at.

While I do not think we ever will get to a 1-to-1 ratio. I do however think there is plenty of more room. And I think a 2-to-1 ratio should be possible. That would then give us close to a 2x extra. And if we then add this to the 1.77x we got from the burning. We get a factor of 3.77x.

However, the strange thing about potential is that we fairly often have it be realized earlier than we think. This can be due to overhype or other extenuating circumstances. Because of that, I think that a 3x the next Bull Run is well within reach. Especially as KuCoin has several new projects in the pipeline. Among them, is the Web 3.0 expansion the 150M funding is intended for.

And all these projects will serve to increase the perceived value of both the company and the token.

What if we look at KuKoin's own goal and use that as a metric

If we look at their roadmap from 2021 that goes to 2023. We can see that their goal is to double the number of users each year. To go from the goal of 12M in 2021, to 25M in 2022 and end up at 50M at the end of 2023.

Road map taken fro: https://www.kucoin.com/blog/what-is-kucoin-token-and-how-does-it-work

And as the worth of a company and its assets correlate to a high degree with its number of users. I would say they see their own potential to be at 2x annually. Especially as they want to see an even greater increase in the number of wallets. More users and wallets mean more trades.

This then would mean that they would perceive their own worth to be 2x at the end of 2022 compared to the start of 2022. Let us then do that math. The KuCoin was valued at $22.4 entering the year. And if we 2x that we get $44.8 as their expected exit value of 2022.

My thoughts and conclusions

While I personally would not use the metric from the roadmap as anything other than an indication. It is all personal, we do things in our own way. And we will value different things differently. This is what caus the big fluctuation in price for crypto, stock, or any other traded commodity. While I have shared with you some of the things I like to look at and do. I would implore you not to take this as financial advice. Instead, use it as a learning opportunity, take what you feel works for you, and use it in your own valuation.

But if you have followed along with all the way to the end here. I will not hold you over fire any longer. I ended up pulling the trigger on some KuCoin. So I now am a proud member of the community. I do see it as more of a long-term investment. Rather than a short-term one.

If you have read all of this I would like to say a massive thank you to you, thank you. This has been one of my meatier posts. But I think that there is a lot to unpack here. And I hope that I have been able to do that in an easy-to-follow way. If you have any questions regarding this feel free to post them in the comment section down below. I will then try and get back to you as fast as I can.

And if you would like to support me and the content I make, please consider following me, reading my other posts, or why not do both instead. You can find my other posts here and here. And if you have not yet joined the KuCoin community, please consider using my referral code: rPD4DK7 or referral link: https://www.kucoin.com I would really appreciate it. And I really think it is something you should consider.

I have also just started a new series of weekly posts, that will go live every Friday. You can catch the fourth step here: