Hello fellow crypto currency roller coaster riders! We are quite deep in the bear market, and today I wanted to talk about investing in cryptocurrency exchanges. Not by purchasing market shares, but by holding their native tokens for utility and of course, growth in the future. I do not work in finance, but I do like to see myself as someone always maintaining a neutral view towards projects. Because a open mind is always better when money is involved, even more when holding "bags" yourself.
(You can scroll down for a TL;DR and for fees)
Why investing in (most) exchanges is exciting and with less overall risk:Let me start this article by showing my excitement for these investments. Instead of hoping that one of the 100+ currency-replacing coins will become a global used coin on the whole globe, by investing in the exchanges themselves, you only risk money on the exchanges becoming a success. A bear market, while negatively impacting exchanges as well, is not half as bad as it is bad as for other coins. Because exchanges mostly win and grow based on volume. We all know how much volume bitcoin has, since it dropped below 6000. The main risk here, in my opinion, is if the exchanges themselves will make it (because there's quite a lot of them), and grow more, and if the cryptocurrency market itself will survive. The latter I have no doubt of. Of Course, standard risks apply as well. Successful hacks or drama will always damage the tokens a lot, but this goes for every project out there.
I want to talk and compare 3 exchanges in this article. Binance, COSS, and Kucoin. I know there are a few more exchanges out there with native tokens as well, but forgive me that I don't have time to research all of them. Some of these exchanges are actually fairly high risk compared to others I am not mentioning, because I do not have experience with them. I recommend you to read this article and put it next to other articles to make your own conclusions and make your own investment advice.
Before I start comparing these three exchanges, I do want to write a little about DEX's. (Decentralised Exchanges).
-----Decentralised Exchanges-----I feel decentralised exchanges hold no future. The nature of true decentralisation means the exchange can hold no funds, which means that every trade done on the platform requires more fees because its sending it between wallets. (But less fees if you transfer a lot of money) Not only this, but these DEX's sound like heaven to wash money in, so they may get shut down. (Because they do not need KYC) And if you are thinking that they won't, because they are decentralised and can't get shut down, then you are gravely mistaken, because law enforcement definitely has its ways to force the developer's to push a update that breaks the exchange. However, people have to admit that these exchanges are interesting, because security would probably be top notch at most of these DEX's, since it holds no funds whatsoever. It can still fall victim if there is a fault somewhere that allows a hacker to abuse a exploit (and then for example replacing a wallet address), but the chances on this are less than with centralised exchanges.
-----Binance-----Binance is the top exchange out there. Not immediately by the top exchange volume, but because it has many altcoins that people appreciate. It has top notch support and is a very trustworthy service that has proven itself to also be reliable and fast. I also love its advanced features and UI, and the liquidity and volume it has on most coins makes trading simple. There are almost no negative things to say about binance, I did not experience any negatives anyway, so far.
So now it's token: BNB.
BNB is a growing token that still grows in utility- you can even get hotel rooms with BNB now. But the most important use is the fee cut on the exchange. If you do a trade and you pay 10 euro fee, it will become 7.5 euro paid in BNB, if you have BNB in your binance wallet. Because binance is at the top, people will flock towards binance to trade again. And the good amount of volume makes people want to purchase BNB tokens. Not the mention with the increasing amount of use cases for BNB, it makes more and more sense for people to hold some of it. Although I do have to note that the market cap of BNB is already quite high, so I do not expect huge growth. It should also be noted that every year, the fee cut gained from using BNB tokens will be decreased. Thus value may also therefore drop.
Investment Opinion BNB: I would consider BNB a medium-high risk investment. This is because everyone knows to trust Binance, and it works really well, so I do not see them fall in the top used exchanges. The token earns use cases every year, however their main utility becomes less powerful every year, which is a red flag for investors. Personally not invested anymore. However, it's also doubtful that binance will leave this coin to die, they will probaly add many incentives over time to hold BNB.
-----COSS-----Coss is something different. They actually have two native tokens: CFT and COSS. Coss had quite a buggy past, but seemed to have learned it's lessons regarding outsourcing development and have shown improvement. All of the past and how they improved can also be read on their medium posts. Support was the one time I needed to use it, fast and friendly. They now hired a in-house development team that build a successful exchange before. The recent released 1.2 version is a huge improvement over the buggy older version, that barely got used for good reason. With 1.2, they also introduced CFT, a token that just like BNB allows you to pay the fees using CFT. This will effectively cut all your trading fees by 25%, the same as binance currently does, without plans to make the cut less effective over the years. I feel COSS is on the right path. I think the token’s low market cap is because it's negative past and people moved on, but now coss is pushing forwards fast and seems to become a good competitive exchange. COSS seeks and seems to become best of all exchange worlds combined, and 1.2 shows they are well on their way. The risk on purchasing and holding COSS is due to the question: Can COSS get more users and bots for volume? At least to get to the 8.5 million daily to run even? They have shown (so far) that they are ready, but it’s a big step.
So now it's tokens: COSS and CFT.
Purchasing COSS tokens will get you passive income over time. Every week (and in the future every day) the income from fees of the exchange are split in half. Half goes towards the company, and half goes towards COSS token holders. These are paid in literary all the coins that are paid by fees. So if bitcoin is traded the most, you will see mostly bitcoin appear in your passive income wallet. I find it's not only fun to watch getting tiny amounts of coins, but also fun to play around with calculations and see the amount of income we can get as volume increases. And we have to keep in mind coss-fsa.com income is calculated on current rates. Should we enter a bull market again, the income in dollars will only rise up.
A small negative here, is that to receive small received coins from holding COSS, you must convert them to ETH or pay for receiving them. As to my understanding, this is a backup to make sure COSS cannot be noted as a security. (And a singapore lawyer already gave the opinion COSS is a utility token). Coss will be holding promo’s sometimes to convert all received coins into CFT or other possible coins. Participating in these promo’s will be entirely optional though.
However you should also note that currently about 90 million coss tokens receive the passive income, out of a 200 million total supply. CFT fee cutting is also taking a bite from the average fee. So it is hard to make a estimate of what average fee to input on a calculator like coss-fsa.com. I find that COSS is a "high risk high gain" investment, because COSS admitted to need about 8.5 million dollar of volume daily to run even. They could have used the CFT utility on COSS tokens. But they did not, this shows that COSS needs additional funds to grow. I do not mind, this CFT causes additional attraction to use the exchange and will provide COSS with extra income it can use, to make themselves and token owners be successful. Win-Win? With CFT being an attractive option, with a well working API, fast deposits and a much more bug-free and stable 1.2 version right now, the growth potential for COSS is definitely there. You should note that COSS went from 0.4 million daily volume to 1.5 already. That is a growth of nearly 4x already. But to also be fair here, COSS is running on half fees this month only. So perhaps this volume might go down again next month. Unless more users and bots will come, of course. Coss's market cap is very low, and volume as well, because it's a platform that needs to prove itself to be reliable and trustworthy. In my opinion, it is already attractive enough for traders to come, and if COSS keeps this up, I feel COSS will meet a bright future.
Investment Opinion COSS: I find coss a attractive well-working platform since 1.2 and might even consider using it as main exchange, if it will house my favorite altcoins in the future. I will not rate it fully high risk, but more as medium-high risk as investment, because I feel COSS definitely delivered with the 1.2 update and have shown good potential, and growth is already proven.
Investment Opinion CFT: I feel i explained enough about CFT above as well, and would recommend purchasing it for traders, but not for holders currently. I say that because the price of CFT is 10 cents currently, and COSS tokens are currently lower in price, which I feel should not be correct a correct value between coss and ctf.
-----Kucoin-----Kucoin is in many ways like COSS. They have proven themselves with a stable exchange that has a attractive UI and API, and that shows in their KCS token market cap. They also have a similar token usage and even the UI looks similar. However, I do not have much good to say about kucoin. I had contact with their support team twice, and I feel I was not helped well enough. Once time, I had nano transferred to Kucoin, and it took a full hour to deposit. (Nano is instant, so I panicked after 10 minutes and being fairly new at crypto) After around 30 hours of writing the support request, I got this reply:
https://i.redd.it/4h8idfbtkoe01.jpgNote that this was a support team member, telling me to write "suppoet" if "still not work".
Another time, i deposited eth to Kucoin and it took way longer. The transaction already showed it was successfully confirmed and received on the wallet address on kucoin, yet kucoin persisted that it was the fault of binance and told me to solve it with them. So Kucoin has quite bad support, in my experience.
Furthermore, the platform is not true to promises and shady. I am also a moderator in Gladius, which has its native token as well. Kucoin states they give a head's up of 30 days before delisting. Kucoin did not give this head's up, and decided to delist Gladius's native token GLA because the lack of volume. They said they would delist it after ~30 hours in their message. After around 8 hours, it was already not possible to trade it anymore. So a double promise broken.
Finally as a example is that kucoin stopped withdrawals of USDT, at the same time the market panicked about USDT. This probably caused a lot of trading and in turn, extra volume for Kucoin.
So now its token: KCS.
Again I have to be quite negative here. KCS holders are entitled to 50% of the profit Kucoin gets from trading fees. They also get a fee cut on trading by holding KCS. Sounds attractive right? Well....Not so much.
First of all, Kucoin has a high probability of a secret system in place that will will give more income to kucoin, and less to KCS holders, at certain volume achieved by kucoin. At more than 50 million dollar traded daily, they start to reduce the 50% fair split to KCS holders. Even better, should the exchange ever reach 350 million volume daily, the 50% split will be reduced to 15%. The worst about this all, is that kucoin is hiding this from its users. When asking this question, no one will give you a clear answer. They will simply link you with how KCS works. Apparently this feature was also confirmed on their reddit and initial whitepaper, but all traces about this has been removed. Yet when asking about it, no one denies it, neither confirms it.
Furthermore, you do not get a coin variation passive income like with COSS. No, all trade fees are simply converted to KCS, and then distributed to KCS holders. So you basically purchase KCS...to get more KCS. This may sound attractive to prevent tiny amounts of "dust" like on coss, but with coss you will also get options to convert all your dust to CFT later.
Lastly, you could hold KCS to reduce trading fees, but you will need a lot, for a tiny discount. For holding 1000 KCS, you will get a 1% cut on fees. so 0,1% becomes 0,099%. The maximum discount is 30%, wich you get by holding 30.000 KCS. A small positive is that fees are then not paid in KCS. You keep the KCS. With binance and COSS, the fee is paid in their CFT and BNB tokens, so you lose the token over much trading.
Investment Opinion KCS: I cannot say that Kucoin is a real bad investment perse, because they are clearly doing well, for whatever reason that may be. They even got a large amount of money injected into the company. I will not come back to kucoin unless there is a token on there that I cannot get anywhere else, and then i will transfer that token out of kucoin. I would -personally- never ever invest in KCS and I will stay away from kucoin at all times.
-----TL;DR-----Investing in exchanges is in my opinion one of the safest bets to make in cryptocurrencies, especially during this bear market. But be sure to read about pro's and con's of their token, and make your own conclusions.
Decentralised Exchanges probably hold no future due to regulation and higher fees.
Binance is the most used exchange for most, and is proven trustworthy, fast, stable and has many good options and liquidity. BNB tokens are an medium-high risk investment, because the market cap is already high, and its main utility of cutting fees, will grow less effective in time, but is still currently an attractive token.
COSS is a exchange which is progressing fast, but has a bad history due to bugs and a mediocre UI. Can they become one of the top players? Yes they can if they continue like this. Time will tell if they gather enough trust and stability, and with trust and stability more users. COSS tokens are a medium-high risk to make a high passive income later or sell the tokens for high profit.
Why people use Kucoin is beyond me. They are shady and not true to promises. would not recommend using it, neither would I recommend holding it's token, but facts do remain that they are doing well so far. I don't think they hold much future value because of the negative things I noted.
Bitcoin can go down and destroy all your initial investment amounts, no matter what project you put it in. Risk factor: Very high.
-----Fees-----Binance:
https://www.binance.com/en/fee/schedule (You can pay fees using BNB. Gives 25% discount currently. Will lower each year till 0%)
Kucoin:
https://news.kucoin.com/en/fee/ (Holding 1000 to 30.000 KCS gives you 1% to 30% discount on fees, that does not cost you KCS.)
COSS:
https://cdn-images-1.medium.com/max/800/1*ykozhrtDOE6y4vT5hFj92g.jpeg
(You can pay fees using CFT. Gives 25% discount currently. Will always stay 25% or more, might increase actually in time. Confirmed by COSS staff.)
(The more volume you make as trader, the less fee you pay)
Thank you for reading!
