Has Binance really faced revenue pressure after being regulated by the US? Since December last year, Binance has significantly accelerated its launch speed on LaunchPool. This happened at the same time as the $4.3 billion fine and settlement with the US Department of Justice, which led to speculation in the market that Binance “may be short of money.” But is Binance really facing revenue pressure?
Binance’s native token BNB broke through $400 this week, a 63.93% increase from the beginning of 2023 when it was priced at $244. It has also risen 27.79% since the beginning of this year, reaching a market value of $61.763 billion.
Of course, the rise of BNB, which is ranked third in terms of market capitalization, has been accompanied by the “crypto spring” that started on February 8th. In addition, it has also benefited from Binance’s active operation of its new asset issuance platform, LaunchPool.
Since December 2023, LaunchPool has accelerated its launch pace, with the number of new listings in the first two months of this year almost half of the total number in the previous year (11). The value of LaunchPool lies in the benefits it brings to users and the help it provides in locking up BNB and stablecoins to prevent outflows.
The rapid pace of LaunchPool coincided with the $4.3 billion fine and settlement between Binance and the US Department of Justice. This led to speculation that Binance, the world’s largest cryptocurrency exchange, may be short of money.
Although the 2023 Binance annual report did not disclose revenue data, the number of registered users (170 million) and the trading volume (16.69 trillion USD) compiled by third parties have both significantly increased, with growth rates of 70% and 215.5% respectively compared to 2022.
In 2022, Binance disclosed a revenue of $12 billion. Considering the overall upward trend in the market last year, it is highly likely that the exchange’s revenue in 2023 will exceed the disclosed $20 billion during the previous crypto bull market in 2021.
As the new crypto bull market begins to brew in 2024, Binance, which definitely does not lack funds, seizes the opportunity for further expansion. However, its goals are changing.
On February 27th, BNB reached a new high of $404, with the selling pressure contributing to the previous high of $398. Today, it is driven by strong buying pressure. This price is less than halfway to BNB’s all-time high of $669.3 on November 7th, 2021.
The current cryptocurrency market has swept away the bearish sentiment of 2022. Bitcoin (BTC), the leader in the market, continues to rise, with its market value reaching $1.1 trillion and breaking through $54,910. Ethereum (ETH) follows closely behind, reaching a high of $3,280.
With a market value of $61.335 billion, BNB surpasses other cryptocurrencies and holds a top-tier advantage, ranking third behind BTC ($1.1 trillion) and ETH ($390 billion).
BNB’s growth is also attributed to its ecosystem. On BNBChain, the blockchain network where BNB acts as gas, the total value locked (TVL) of cryptocurrencies is $44.91 billion. According to the third-party data website DeFiLlama, there are over 600 DeFi applications on BNBChain, with 102 of them having TVL above $1 million. These applications support the activity on the BNBChain and increase the liquidity of BNB.
In addition, BNB continues to maintain its burn rate on the chain. As of now, BNB has burned a total of 52,457,076.73 BNB in 26 quarters, with 25.96% of BNB already out of circulation.
Outside the chain, the most exciting action that affects the price of BNB comes from Binance, where BNB was previously used as the platform’s native token. Since the end of last year, the platform has actively maintained BNB’s important usage scenario, LaunchPool.
Users familiar with LaunchPool know that it is a channel for staking BNB or stablecoins to obtain new assets. Users can receive these new Web3 project assets within a limited period of time by depositing BNB or stablecoins into the open LaunchPool, without any additional costs.
Since December 2023, LaunchPool has accelerated its monthly pace of “new coin mining,” with three new assets launched that month. In January, the pace continued with three new launches, and from February to now, two new launches. It should be noted that LaunchPool only started its operations in April last year and released a total of 11 new assets throughout the year, while in the first two months of this year, it has completed nearly half of last year’s “missions.”
Looking at the performance in the secondary market, the new assets on LaunchPool have been recovering since December last year. The first two new assets, ACE and NFP, are still in a downward trend, but the third asset, AI, has increased by 32.52% since its first day of trading. XAI, a gaming blockchain launched on January 5th, had a maximum increase of 165% and is still up by 151.66%. For users who obtain new tokens purely through staking on LaunchPool, it’s considered pure profit.
LaunchPool has brought benefits to users and Binance. Users receive airdrops for free, and if BNB appreciates during that period, users staking BNB can enjoy double profits. Binance, on the other hand, retains users and their BNB and stablecoins.
In just January and February, Binance locked a total of $9 billion in stablecoins and 15.2 million BNB through LaunchPool. The latter is worth approximately $22.8 billion, and the total locked value is $31.8 billion. Taking into account the overlap of users participating in staking, the average locked value per LaunchPool participation is about $5.56 billion.
According to data from DeFiLlama, during the same period, the total asset value on Binance’s chain was between $80 billion and $90 billion. At least 6% to 7% of the assets remain on Binance through LaunchPool.
This proportion should not be underestimated. After Binance reached a settlement agreement with the US Department of Justice, it lost $2 billion in just one week. The accelerated pace of LaunchPool’s new listings coincided with that event.
After the disclosure of the $4.3 billion fine amount, combined with Binance’s actions to retain users and assets, there were speculations in the market and the Web3 community that Binance was short of money and that retaining users was essential for preserving the base of transaction fee revenue.
Despite the settlement, Binance’s newly appointed CEO, Richard Teng, repeatedly emphasized in public statements that the company’s “financial strength is unaffected,” and that it has “no debt in its capital structure, reasonable expenses, and considerable revenue and profit.” However, the market still seems to doubt Binance’s ability to cope with regulatory actions and potential fines.
So, does Binance really lack money? Ultimately, it depends on its ability to generate profits. In other words, its revenue and profit.
Since Binance is not a listed company and its business scope extends beyond trading, obtaining accurate revenue data is difficult and largely relies on the company’s own disclosure.
In January this year, Binance released its “2023 Annual Review” on its blog, which did not include revenue data. However, this does not prevent us from using estimation and comparison methods to get a glimpse of the profitability of the “world’s largest cryptocurrency exchange.”
Based on Binance’s own year-end summary and the annual trading volume from third-party statistics, the platform maintained significant growth in 2023. Although this year’s revenue data is “confidential,” historical data from previous years is still available on the internet.
According to the “Annual Review,” Binance added over 40 million users in 2023, increasing the total number of registered users to 170 million, compared to 128 million in 2022. Third-party statistics show that Binance’s trading volume in 2023 reached $16.69 trillion, a 215.5% increase compared to $5.29 trillion in 2022.
Although the revenue for 2023 was not disclosed, Binance disclosed its revenue for 2022, which was $12 billion. In the previous crypto bull market in 2021, the disclosed revenue was $20 billion. This indicates that a crypto bull market is an absolute revenue-generating year for cryptocurrency exchanges.
In 2023, Binance saw growth in both the number of registered users and trading volume, with the latter nearly tripling. The growth in user volume and trading volume will contribute to an increase in transaction fee revenue, which is the main source of revenue for cryptocurrency exchanges. A conservative estimate suggests that Binance’s revenue for last year was no less than $20 billion.
As for profit, if we follow Binance’s previous rule of “burning 20% of profits” with BNB, based on the total burn amount of 8,233,412.617 BNB in 2023 and the median price of BNB in each quarter, Binance’s profit for the whole year was $11.108 billion.
In summary, Binance has maintained high-speed growth since its establishment, whether it is market share, user base, or revenue. It still lives up to its title as the “world’s largest cryptocurrency exchange.”
It is worth noting that as the growth trend continues, Binance has started to expand its boundaries. In addition to the “2023 Annual Review,” the company has published blog posts disclosing the performance of Binance Pay in the payment field.
Binance Pay is a cryptocurrency payment method launched in 2021. After three years of development and iteration, the total transaction volume of this product has reached $120 billion. As a comparison, this data accounts for 0.4% of China’s third-party payment transaction volume ($28.33 trillion) in 2023.
Although the proportion is not large, the growth rates of various indicators are significant. In 2023, Binance Pay added thousands of merchants, increased active users by 70% to reach 12 million, and achieved a total transaction volume of $77 billion. This means that in the past year, each user using this payment method completed an average transaction of $6,410, mainly for payment, gifting, sending, or receiving cryptocurrencies.
Binance CEO Richard Teng believes that cryptocurrencies and Binance Pay will bring convenient experiences to populations in underdeveloped countries and regions where payment services are inconvenient. He stated, “Now, they can use cryptocurrencies for payments, transfers, and remittances 24/7, at a cost that is only a fraction of traditional finance.”
Facing the observation, intervention, and regulation of cryptocurrencies and emerging finance by countries around the world, Binance seems to be searching for new breakthroughs beyond trading services and getting closer to the core mission that Richard highlighted when he took office: promoting finance towards compliance and broader freedom.
(Disclaimer: Readers should strictly abide by the laws and regulations of their jurisdictions. This article does not represent any investment advice.)
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