From Metrics to Market: Assessing the Real Financial Impact of Leading Exchanges

Estimating the Market Capitalisation and Virtual Value of Leading Crypto Exchanges

Have you ever wondered what your favorite cryptocurrency exchange is actually worth?

Most crypto platforms are private companies, meaning they are not publicly traded. However, one exception is Coinbase, whose net worth is publicly available.

This naturally raises the question: can the value of other crypto exchanges be estimated by comparing them to Coinbase, given its known valuation?

For the first time, this analysis delves into the methods used to tackle this question, employing precise mathematical calculations and a thorough evaluation of both tangible and intangible factors.

Disclaimer: the article is presenting a possible logic that may or may not be utilised in calculating the exchanges’ virtual capitalisations. While based upon verified data, Coinbase is discussed and compared to performance of non-public exchanges, with extensive market speculation throughout, hence, the results of the calculation do not represent the factual exchanges’ market capitalisation and value. 

Note: the data below, as well as the basis for the Exchanges’ Trust and Value Index, is relevant as of November 20, 2024.

Ratio-Based Evaluation of Cryptocurrency Exchanges’ Virtual Capitalisation

As of November 20, 2024, Coinbase’s market capitalization stood at $81.26 billion.

One of the popular authors in crypto media, Tom White introduced an approach to estimate a metric referred to as the Virtual Capitalisation of cryptocurrency exchanges. This method calculates ratios based on key metrics that most accurately reflect an exchange’s net worth relative to Coinbase. The core metrics include:

• Average daily trading volume

• Web traffic

• User count

• Exchange token’s market capitalization

To apply this formula, the research examines seven prominent cryptocurrency exchanges that vary in size and potential value:

• Binance

• Bybit

• OKX

• Kraken

• WhiteBIT

• Gate.io

Using data and insights gathered from CoinGecko, CoinGlass, SimilarWeb, and official statements from the exchanges, the following statistics have been compiled:

The value of each exchange will be individually calculated using one of the selected metrics to determine an estimated range.

The final calculations yield the following results:

Exchanges’ Trust and Value Index

While arithmetic metrics may be sufficient to estimate an exchange’s virtual value, the true essence lies in trust and overall value.

To provide a more comprehensive perspective on an exchange’s market position, the Exchanges’ Trust and Value Indexhas been introduced.

The Exchanges’ Trust and Value Index is an analytical framework designed to assess both the financial stability and trustworthiness of an exchange.

The Index methodology uses a numerical scale ranging from 1 to 10, where 10 represents the highest score and 1 the lowest.

The evaluation is based on six key metrics: transparency, activity, capital, security, compliance, and proof of reserves.

The Transparency metric in the “Exchanges’ Trust and Value Index” assesses how openly an exchange operates, particularly regarding the disclosure of its financial status, operations, and decision-making processes.

Activity measures the organic traffic and user base of a cryptocurrency exchange, providing valuable insights into its operational performance. This metric is determined using self-reported audience data and web traffic statistics.

The Capital metric gauges the financial strength and liquidity of a cryptocurrency exchange. It is calculated based on total trading volume and futures trading open interest (OI).

Security evaluates how effectively a cryptocurrency exchange safeguards user funds, data, and platform integrity. This metric considers anti-money laundering (AML) practices, compliance with the Cryptocurrency Security Standard (CCSS), the exchange’s history of security incidents, and asset custody protocols.

Compliance measures how well a cryptocurrency exchange adheres to legal and regulatory requirements. It is assessed based on the legality of its operations, adherence to sanctions compliance, and integration of Financial Action Task Force (FATF) frameworks.

Results: 

When evaluating cryptocurrency exchanges using the Index, clear differences become apparent.

In terms of transparency, exchanges like Binance, Coinbase, and Kraken make their top management and proof of reserves publicly available. Others, such as OKX, demonstrate transparency through third-party audits or strategic partnerships.

For activity, Binance leads with over 200 million active users and substantial web traffic. Coinbase follows with 73 million users, while Bybit lags behind with 10 million. WhiteBIT, although smaller, reports a respectable 5 million users.

The capital held and traded across these platforms varies significantly. Coinbase ($6 billion), OKX ($5.4 billion), and WhiteBIT ($5.1 billion) report nearly identical daily trading volumes. However, Binance and Bybit dominate, with $31 billion and $7 billion in daily trading volume, respectively.

Compliance is another key differentiator. OKX, Coinbase, and Bybit adhere to FATF standards, with Coinbase standing out due to its strict compliance with U.S. regulations.

Regarding proof of reserves, WhiteBIT relies on third-party audits but keeps its reserves private for security reasons. Meanwhile, Binance, OKX, and others maintain public transparency, while Bybit, Kraken, and Coinbase allow personalized access to their reserves.

What the Exchanges’ Trust and Value Index Means for Crypto Exchange Value

The results of the Exchanges’ Trust and Value Index demonstrate that the value of a crypto exchange extends beyond simple ratio calculations.

Trust plays a crucial role alongside liquidity, meaning this index helps measure not only the financial worth of an exchange but also its long-term sustainability and the level of user confidence it fosters.

In the end, an exchange’s true value isn’t solely defined by numbers. It hinges on both its current standing and its potential for success – or failure – in the future.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.