Recently, MEXC announced the MX 2.0 program. Several Twitter KOLs believe that MX’s current $200 million market cap is grossly undervalued.
I agree with the action of benchmarking the market value of the platform token against mainstream platforms, but I would like to consider from the two different phases of MX 1.0 and MX 2.0 and use mathematics and logic to calculate how much the valuation of MX should be to be considered reasonable.
I. The reasonable valuation of MX in MX 1.0 phase
MX, FTX, BNB prices and the all-time high gainers are actually not that important anymore. We are mainly looking at the market value of the platform tokens because this is a core criterion for the valuation of the trading platform.
The current market cap of MX is only about $290 million, with a market cap ranking of 240. What range should the actual market cap of MX 1.0 phase be in?
According to the latest data released by MEXC, in the past, MEXC burnt a total of 450 million MX tokens, with a total burnt value of $112 million, which comes from 100% of the platform’s spot transaction fee profits.
Using the valuation method of tech companies to estimate the market value of MX (i.e., the valuation of the MEXC platform), the market value of MX should be between 20x-30x PE, i.e., between 1.12 * 20–1.12 * 3 billion dollars. (Note: Some people also use 30x-50x PE for estimation. In the blockchain industry, 20x-30x PE is more conservative. Coinbase announced an operating profit of $322 million in 2020, and the market cap of COIN’s opening a few months later reached $80 billion at 248x PE level at one point.)
Even with this valuation, the result is still an under-valuation of MX’s market cap, as MEXC’s earning components include not only spot transaction fees, but also multiple product lines such as leverage, leveraged ETFs, futures, PoS mining pools, MEXC Labs investments, and campaigns such as MEXC Launchpad, M-DAY, etc.
For now we have no way of knowing MEXC’s total annual profits, but MX should have a market cap well above $3.36 billion.
Second, we can make comparisons between the market cap of the platform tokens of MEXC, FTX, and Binance.
The token FTX has a market cap of $6.066 billion. Recent news claim that SBF is seeking a new round of funding for the FTX platform, which has an updated valuation of $8 billion. Compared to the fluctuating market cap of the FTX token, its platform valuation is relatively reasonable.
On the contrary, FTX is 20.84 times the market value of MX, and BNB is 319.9 times the market value of MX. In comparison, MX’s market cap is still low, and MEXC and FTX do not exactly belong to the same category, and it is more reasonable to benchmark the valuation of MX against Binance. The market value of MX should have at least 100 times more space, but that depends on whether MEXC can become the next Binance.
II. From MX1.0 to MX 2.0
What is the gap between MX and BNB before MEXC could become the next Binance?
Personally, I think that in the MX 1.0 phase, what MEXC does around MX is far less than BNB of Binance: MX’s usage scenarios are mainly focused within the platform, such as MEXC Launchpad, M-Day, MX-DeFi, MEXC voting, MEXC PoS mining pool, and the Kickstarter event.
Analysis of the MX 2.0 program shows that MEXC starts from both the supply side and the demand side: deflation of MX on the supply side and increasing the usage scenarios of MX on the demand side.
On the supply side:
- The MEXC Foundation reduced MX holdings to 100 million tokens, directly solving the previous question in the MX community — the final flow of MEXC.
- 40% of all profits are used to repurchase MX from secondary markets. This includes profits from products and business lines across the platform such as spot, leverage, futures, ETFs, MEXC Labs, etc. The purpose of this means is to remain 100 million MX in circulation, but it may also accelerate the process of MX repurchase and burning.
On the demand side:
- 250 million tokens are used for MEXC Labs and strategic partnerships. This means that in the MX 2.0 design system, MX will no longer be limited to the functions as the platform token but will further expand its usage scenarios outside the platform system, with the clear intention of not only benchmarking BNB, but also declaring tis strong will to become the next BNB.
The official announcement also mentioned key words like “building an ecosystem”, “building a blockchain infrastructure” and “establishing strategic partnerships.”
In fact, MEXC has already started to attempt to expand the usage scenarios fofor MX through partnerships, such as via mining with MX/BAKE on BakerySwap.
I’m not sure if MEXC will take after Binance and release a smart chain to build an ecosystem. Even if it does not release a chain, there are enough ongoing activities in mainstream ecosystem projects around Ethereum, Fantom, Solana, Avalanche, Polkadot, and Polygon.
III. The reasonable valuation of MX 2.0
To achieve a reasonable valuation of MX 2.0, it is crucial to assess the development of the MEXC platform itself.
A recent article revealed a set of key data: In 2021, MEXC overseas users grew by 1100%, its annual transaction volume grew by more than 700%, and overseas users accounted for 70% of the total number of users.
This set of data clearly shows that MEXC’s globalization operation in the past two years has grown more successful. MEXC’s published MX repurchase data can corroborate sideways the growth of MEXC’s users.
The repurchase and burning of MX was funded primarily by a portion of the spot transaction fee profits. In the above table, select data arbitrarily for November, August and May 2021. The funds used to repurchase MX were $8,256,803, $5,328,844, and $8,304,902, respectively, representing a sequential growth of 1,204%, 273.3%, and 1,627%, respectively, compared to the same period in 2020. (Note: Due to market factors, interested parties can sample the calculations on a yearly/quarterly basis to obtain results with higher accuracy)
Spot earnings growth data and user growth data can corroborate each other. It can also be corroborated sideways from looking at the fundamentals of MEXC.
In the past two years, the speed and quality of projects that have gone live on MEXC are beyond question; you can find almost all your interested projects on MEXC. It is also interesting to note that many of the projects launched on Binance and CoinBase debuted on MEXC. “The first place to launch quality projects” and “The Next Binance” seem to have become its mantra.
To sum it up, MEXC is growing as a platform with the potential to become “The Next Binance”. Due to the partnership with Bybit, it is complementing the advantages of derivatives. As for how to value MX2.0 reasonably, I believe the answer is clear.