3 Reasons Why You Should Hold BACK from Investing in Binance and BnB
Just shut up about Binance. We don’t think you actually know anything.
As an investor in the crypto space, do you really think you have enough information at your disposal to invest in BnB? Here are some reasons why we don’t think you have done proper due diligence to actually make a decision on BnB and Binance.
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As we wrap up with the year, Binance has been one of the best performing coins year to date, with the token surging 300% in value. Indeed, through its ongoing technology pushes and public relations savviness, Binance has been able to capture the heart and minds of traders and investors from all facets of the crypto arena.
We met with an investor from a multi-hundred million dollar crypto fund recently, and one of his first questions to us was about Binance. She says: “we’ve been watching BnB performing so well this year, and it just keeps going up and to the right, but we can’t possibly justify holding the token to our US LPs because of reasons such as regulatory uncertainty and others.”
This is a real concern for many funds with US-based, traditional institution LPs, and perhaps this is why Global Coin Research is seeing large funds trying to raise significant capital from Chinese LPs instead, because their loose LP terms will allow them to capture a part of a rocketship company that continues to thrive in a compliance-gray area of the market.
Indeed, from a purely mathematical exercise, if you take the Binance’s profit numbers, and their burning schedule as claimed, and perform a traditional discount cash flow in perpetuity, the Bnb token at the moment is trading at a discount to its realized value.
Nevertheless, the argument to that is, and many smart folks have argued for this before, which is there is no regulatory supervision nor enforcement on top of all this profit number and burn claim. So in order to believe the aforementioned value, you will then need to take the companys’ word. And to many folks in the community, they are taking the CEO’s word, CZ’s word.
So it is understandable to us, that under the current global regulatory conditions when all of the regulators’ attitude towards cryptocurrencies are vague, uncertain and lack any basic requirement for company disclosures and filings for exchanges (or Binance just avoids those types of filings), how would anyone feel comfortable betting large amounts of traditional LP and institutional money into the token? And as Bnb becomes a larger % of the overall crypto market cap despite these concerns, this may be partially why traditional institutions are still not coming into space anytime soon.
Nevertheless, we do commend and recognize that the Binance team has been working hard with regulators around the world and has become one strong and consistent advocate for global crypto adoption and more comprehensive regulation. CZ and his executive team travel all over the world to speak with regulators and they have successfully found a welcoming base in Singapore for now. But of course, Binance will also be one of the largest beneficiaries when crypto gets recognized internationally.
Often when Global Coin Research speaks to individuals and institutional investors in the space, their knowledge of Binance is at such a superficial level, and we think to ourselves: “you have only 30% of the information on Binance and BnB, and you are betting 30% of your fund on this token? What kind of investor are you!?” For any experienced value investor, this amount of information gap renders risks that are against any investing practices.
And while we think event-driven trading and short term investments make sense for many investors, if you really want to be a true value investor and be an excellent investor that stands out from the herd, we really don’t think what you know is enough. Here are 3 reasons, or data points, that we encourage you to get to know better when doing your homework on Binance.
3 Reasons Why You Should Hold BACK from Investing in Binance and BnB
1) How much do you know about Binance’s Co-founder, He Yi?
As much as CZ hustles and we give him all the credit for it, most western investors have never seen, or even heard of He Yi, the cofounder of Binance. He Yi cofounded Binance with CZ and was co-executives with him and Star Xu when they were at OKex together. And here is why we think He Yi is important.
Typically in a successful technology company, we often see a founding team that has complementary skill sets, with two or three individuals combining their expertise from product, technology and business. While CZ has an exchange tech and product background and He Yi has a marketing and media background, over time, their responsibilities have also evolved into live PR figureheads engaging separate parts of the world, and preaching the story of Binance to western and eastern media, respectively.
For any large company, one of the number one priorities for the CEO is public relations. While we think TRON’s Justin Sun may have gone a bit overboard, what CZ and He Yi have done is more divide and conquer. CZ is responsible for much of the English language media relations and PR, while He Yi manages the Chinese and much of the Asia market.
And any involved crypto person should know (and this is what we at Gobal Coin Research have been talking about nonstop!) at this point that as much of the crypto trading markets is being moved and influenced by the Asia China markets as the US market. He Yi’s role in the Chinese market and the larger market arguably has been discounted so much by the non-Chinese speaking audience because of the language barrier. For example, according to CZ, He Yi was responsible for Binace’s inhouse Libra project, Venus. In the past, Global Coin Research has also highlighted He Yi’s interviews in Chinese, in where she shares different and sometimes notably more detailed information about Binance products than what we’ve read in the western media.
So regardless of how you look at it, not knowing anything about He Yi or knowing what she is saying, in this case, gives you a disadvantage to understanding Binance simply because she provides a plethora of information on the internet about the most important aspects about Binance, and the least thing you can do is go to Google Translate to see what she is talking about. Just like CZ on Twitter, He Yi shares a lot of information about Binance and other exchanges on Wechat and Weibo (Chinese Twitter) in Chinese, so one piece of advice we have is to start from there.
2) How much do you know about Binance’s top customers and business partners?
While analysts can chart projections and estimate future revenue, it is important to know where Binance revenue that ultimately drives the Bnb value comes from. But the sad thing and truthful thing is that we don’t think most Bnb holders can name one Binance top customer.
Most recently, Pantera Capital’s partner Paul Veradittakit took a trip to Southeast Asia, and he shared in his blog that he spent a dinner with the Binance team and its close partners, along with a picture below. We’ve seen these partners many times before in Asia, but many of them don’t travel to the US, or rather, they actively avoid the US.
In the picture below, how many people sitting around the table do you recognize below? If you can name half of the people on the table, then we think you are doing better than 95% of the investors in this space.
While the volume at Binance, along with many other exchanges are still retail-driven, these platforms are increasingly more so relying on large trading desks and ever-growing institutions for deal-flow and large volume trades. It’s prudent for any investors in Bnb to actually know who contributes significantly to Binance’s top line. Because if you don’t, then you really don’t know how the sausage is made, and wouldn’t be able to fathom any supply-side risk for any exchanges.
In a small industry like ours is where we can count on our fingers the number of large quant and trading funds, if a large fund or customer under a certain jurisdiction face any legal challenges or internal crises, it will certainly affect Binance’s bottom line. So first of all, do you know who these funds are and where they are registered? If they are registered in Hong Kong, did they recently receive the fund license in Hong Kong or will they eventually do so?
These are the types of questions we expect people to ask. There are also many notable customers not shown in the photo below, so what we are demonstrating here is just merely an example of what you ought to know and think about (and this should really apply to an evaluation in any exchange token).
3) How much do you know about Binance’s strategy in China and the crypto markets situation?
Binance’s reputation in China has been much contended by western-based folks, from media FUD coverage about its “Shanghai” office to speculations of OKEx and Huobi’s closer relationships with the Chinese government. While the media doesn’t hear about Binance in China very much, we encourage investors to think thoroughly about what Binance aims to do in China. For us, the team certainly seems to be increasing its presence in China, not less.
For one, Global Coin Research was the first to break the news that Binance made its first strategic investment in China into a Chinese media and advisory firm called Mars Finance, along with Matrixport and Ceyuan Ventures in mid- September. Just two months later, it made another acquisition with the Beijing-based DappReview for an undisclosed sum. Along with that, the ongoing new offerings of leverage and derivative products seem like a way to appeals more to speculators in China, not less.
Additionally, there is an even more important reason why you should better understand China and the exchange landscape there (to start, check out our multi-page post about Huobi and its founder Leon Li). As CZ mentioned before, many exchanges in China will make up FUD news about them and others (other top exchanges probably have also experienced this). Unfortunately, the business practices in Asia are not as sophisticated and civil as the US (generally), and small competitive firms will take whatever it takes to bring an opponent down.
So if you know Binance’s worst enemies are in China, whether FUD-inducing ones, or real-rising competitors, shouldn’t you be doing some more homework to better understand who those players are and what they plan on doing to do next? No one seemed to have taken the initiative there, and we think that it’s about time that smart investors stop being so reactive to the market and anticipate these events. So first, you need to start understanding the local players at hand.
China is an important market for Huobi and OKEx, but it is clearly not something Binance is discounting. While the regulatory landscape is more cumbersome and time-consuming to navigate, we expect further inroads into the second-largest crypto market from the company. So while you speculate on what other exchanges are doing in China, we encourage you to do more rigorous homework on what Binance aims to do in the country, and that in some ways that require you to start with point 1) and 2).
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