OKEx — yet unrealized perspective

Target price OKB — 51 USD
Target price OKT — 221 USD

OKex Exchange project background

Launch year: 2014
Founder: Mingxing “Star” Xu
Purpose: Cryptocurrency exchange
24h trade volume: > $6 billion

The history of the project began when Chinese entrepreneur Star Hu created the OKcoin exchange in California. Starting in 2013, OKcoin offered a rather innovative solution for the crypto market at the time — trading derivatives on cryptocurrencies (most exchanges were limited to spot trading). At that period, the United States government was actively pushing a policy to ban blockchain projects that traded cryptocurrency futures, and the team was forced to change headquarters to Hong Kong. So, in 2014, OKEx was created based on OKcoin. The Chinese authorities’ more flexible policy towards cryptocurrencies, as well as the broad demand for new instruments from the crypto community and rapid market growth predetermined the platform’s future success.

However, OKEx’s development path can be characterized by the phrase “per aspera ad astra” (through thorns to the stars). The platform was accused of price manipulation when the market collapsed in March 2018, and in May of the same year the company’s permanent CEO, Chris Lee, moved to Huobi. Due to disagreements with Chinese authorities, the exchange moved its headquarters to Malta, and in October 2020, OKEx founder Star Hu was arrested by authorities amid a scandal involving lost of user access keys, which led to the withdrawal suspension from the exchange for more than a month.

Nevertheless, the company has passed all tests with flying colours and managed to find solutions to all problems, proving that safety and reliability remain its top priorities.

At the time of publication, OKEx is ranked 12th in absolute rankings on Coinmarketcap and 6th by daily trading volume.

In general, OKEx can no longer be simply called an ‘exchange’. It is a technology platform that provides a comprehensive set of cryptocurrency and blockchain services:

  • Spot trading
  • Margin trading — leverage, futures, options on BTC\ETH
  • OKEx Earn — token stacking service
  • OKEx Loan — an exchange platform-based C2C and DeFi loan aggregator
  • Jumpstart — a platform for initial offering and sale of tokens
  • OKEx mining pool — BTC mining pool
  • OKEx Bridge — a service for exchanging assets between different blockchains
  • OKEx Wallet — platform’s own multichain crypto wallet
  • OKEx Cloud — a solution for project teams to build their own cryptocurrency exchanges, leveraging Okex’s extensive experience in technology and product development
  • OKB — a utility token for commissions payment and participation in the exchange innovative activities
  • OKExChain+OKT token — a public blockchain system for creating and running decentralized applications
  • OKex Blockdreams Ventures — cryptocurrency start-up venture capital fund with an initial capital of USD 100 million

In their strategy, OKEx emphasizes broad international expansion and building relationships with regulators. One example of this is the series of “Institutional Talks” events that regularly take place in major cities around the world.

OKB token launch

OKEx’s own token, OKB, was launched by the exchange in mid-spring 2019 in order to provide traders with an opportunity to reduce transaction fees. Depending on the number of tokens and asset type, fee savings could amount up to 40%.

In addition to its utilitarian intra-exchange function, the token also offers several indirect benefits associated with participation in the OKex ecosystem:

  • the right to invest in projects placed on OKEx’s own platform for IDO — “Jumpstart”
  • token utilization within the “OKEx Savings” system
  • use of auxiliary exchange functions — rounding of micro-balances, trading, collateral as a part of margin positions opening
  • applying the token to OKNodes launch

The exchange aims to develop the infrastructure for OKB use in wider ways, not limited to the crypto sphere. So, it is not only possible to use the token with a variety of crypto wallets (Ledger, Mirthril, Dapp Pocket, etc.), but also as collateral on specialized lending platforms (NerveNetwork, LinkEye), means of payment in various stores (Coinify), or within decentralized applications (DappBirds), as well as within game space (Enjin, FishChain). An OKB token can be used to pay for online services use on Bittorrent.

In order to maintain the deflationary scenario of OKB’s value growth, the exchange allocates 30% of the amounts received in commissions on the spot market to the redemption of tokens on a quarterly basis. During the last, the 11th cycle, 2,006,412 OKBs were liquidated, at an average price of around 35,6 million USD, limiting the number of tokens in circulation to 269,4 million (compared to 300 million at the start).

OKT & OKExCHAIN development prospects

In 2021, the exchange launched the OKExChain blockchain with a native OKT token. This event allowed OKEx to take the next step in its long-term development strategy aimed at creating the most user-friendly and efficient “all-in-one” super app. The addition of blockchain to the company’s ecosystem will enable to start deploying its own DeFi app system. It is currently the fastest-growing industry in the crypto economy, full of innovation and prospects, and it makes sense that the company would seek to carve out its market niche.

OKExChain was launched by stacking OKB token on Jumpstart platform between December 2020 and January 2021. About 10 million OKT tokens were issued after the genesis event. Further generation has been implemented using the PoS algorithm and involves a reward of 0,5 OKT per block with a maximum circulation of 41,96 million tokens.

Competitor analysis

OKB/OKT token price valuation

When assessing the company’s activities, it should be borne in mind that OKEx is a private company operating in many areas. Since the company’s shares are not traded on a stock exchange, the only way to generate income from investing in the company’s business is to buy tokens.

Due to the division of tokenomics into two parts — centralised (OKB) and decentralised (OKT) — the potential and price dynamics of each token may differ.

OKB is a traditional utility token with a deflationary pricing model. The exchange team has endeavored to ensure it a maximum possible use, both internally and by external projects and applications. Given that a part of tokens is withdrawn from circulation every three months, the outlook for price growth looks rather optimistic. When compared to tokens of its closest competitor, the Binance exchange, in terms of number of users and trading volume, OKB is significantly undervalued. It had more value losses than other tokens at the end of the last crypto market decline. The reason for this may have been the fact that a large share of business comes from the Chinese market, whose tight regulation was the main reason for the price drop. However, OKEx has long experience in conflict resolution with the authorities and has developed successfully despite the restrictions that have been in place since day one. The token inclusion into Alameda Research’s crypto investment fund portfolio also confirms the investors’ confidence.

The indicative price for the coming year, according to our estimates, is USD 51, which is 251% upside from the current value.

Among the risk factors that could affect the token price are the overall market dynamics (if the decline continues, it may take considerably longer to recover) and the possibility of increased regulatory pressure from the authorities.

The situation with the OKT token price analysis is less clear-cut. Due to the relatively short history of the token use (less than six months) and the fact that it depends on a large number of circumstances, it is difficult to predict its exact future price. The token utilization will be directly linked to the development of decentralized services based on OKExCHAIN.

During the last growth phase, OKT peaked at USD 240, in line with optimistic market expectations. However, the token lost more than 70% of its value on the decline, indicating high volatility and weak support from long-term holders.

It should be noted that, paradoxically, OKT is generally less susceptible to risks from state regulation because of its decentralised function. The main challenge OKExCHAIN will face is community support in terms of the number of applications and protocols that use its blockchain. Accordingly, if the planned development and announcement of its DeFI platforms’ minimum number goes under to plan, the ‘decentralised OKEx’ ecosystem could not only regain the last month value but could largely surpass past marks in the short term. If the valuation is based on the number of users, number of transactions and a rather limited maximum level of tokens in circulation, then comparing these figures with our Binance exchange valuation (users 0.12, transactions 0.95, number of tokens 0.26), we can assume that the expected price will be in the USD 221–350 range with up to 354% upside potential.

OKB/OKT tokens valuation using “real options” method

In addition to the macro assessment based on the ratio of token usage to the respective indicator of competitors, we used a “real options” method based on historical volatility and price movements over the last three months.

Execution of the BULL, BEAR or BASE token price movement scenario will depend on similar circumstances: the Chinese government authorities’ regulatory actions in respect to the exchange, the speed of market recovery. For the OKT token, the DeFi applications’ launch pace will be of heightened importance. In case of a successful course of events, the price has every reason to reach the indicated levels.

Data sources

  1. https://www.okex.com/okb
  2. https://www.okex.com/jumpstart
  3. https://www.okex.com/earn
  4. https://www.okex.com/okexchain
  5. https://www.oklink.com/okexchain
  6. https://www.coingecko.com/en/coins/okexchain/usd
  7. https://www.coingecko.com/en/coins/okb
  8. https://etherscan.io/
  9. https://blockchair.com/
  10. https://app.intotheblock.com/coin/OKB
  11. https://coinmarketcap.com/currencies/okexchain/
  12. https://www.similarweb.com/ru/website/okex.com/?competitors=binance.com
  13. https://www.okex.com/academy/en/okex-2020-year-in-review

Calculation methodology:

1. Trading volume in the last three months of 2021 (data from coingecko.com)

  • March: $166 bn spot market + $560 bn (derivatives without options)
  • April: $291 bn spot market+ $1,150 trln (derivatives without options)
  • May: $359 bn spot market + $1,400 trln (derivatives without options))

Total: 816 + 2,100 = $3,926 trillion

2. Trading volume for the full year 2020 (based on 2020 OKex exchange report): 445,372,695,749 (spot market) + 892,715,730,650 (futures) + 337,538,638,214 (swaps) = 1,675,627,064,613 USD total

3. Revenue for 2020:

Based on the commission per transaction, the average commission of 0,18% on the spot market was discounted by 20% via the use of OKB tokens. The average commission on the derivatives market (excluding options) is 0,056%.

0.144 * 445,372,695,749 (spot market turnover) = $641 mln

0.056 * 892,715,730,650 (futures market turnover) = $499,920

0.056 * 337,538,638,214 (swap market turnover) = $189,021

Total: 1,330,277 USD

4. Revenue for the last 3 months of 2021 based on commission factors as in point 3.

If you have any questions, you can contact us as follows

via Telegramm — @DeltaTheta_Research

via email — Research@deltahteta.tech

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