Chinese born Huobi is an exchange with light years of experience in the crypto space. Founded in 2014 by Leon Li, the company officially moved to Singapore in 2017 following the Chinese government’s ban on cryptocurrency exchanges. Interestingly, Huobi wasn’t created with a native token. Its exchange token the Huobi Token (HT) came out the start of 2018, seemingly following in the footsteps of Binance and the successful BNB. So, how does it compare to DGTX?
Why Launch an Exchange Token 4 Years Later?
Huobi exchange was already hovering around the top three exchanges by volume when it decided to launch its exchange token. So, why bother? Well, the BNB token certainly seemed to make sense for exchanges trading high volumes.
Having its own token, Huobi could create more value and ROI for its investors. Just like BNB, and DGTX, the value of HT is tied into the performance of the exchange.
Thus far, the HB exchange token has shown mixed results–exceptional performance, followed by months of lackluster results and a recent uptick.
HB token value, as mentioned, is tied into the performance of the exchange, however, there are other factors at play. These include coin supply as well as internal mechanisms of the Huobi ecosystem.
Performance of the Huobi Token (HT)
The HT is no BNB, not yet, at least. But why? It seems that Huobi’s use cases for the HT are currently not so strong.
Another key factor is that Huobi’s target market is different, targeting institutional investors, and other large investors, many of which still remain at the gates.
But while HT hasn’t blown up like BNB, it has experienced another rally of its own lately, leaping from $1.30 on 4th March to almost $2 on 7th March, before descending once again to trade at around $1.77 today, still significantly up this month.
Huobi also has some enthusiastic supporters:
— Goomba (@remigoomba) March 6, 2019
One valid point to remember about exchange tokens is that the value of the token is linked to the profits of the exchange, not cryptocurrency prices.
This means that even in a bear market, it doesn’t matter whether the prices are falling, as long as the exchange keeps trading. This makes exchange tokens with clear use cases a good source of ROI.
Huobi Token (HT) Use Cases
Voting on Coin Listings
Unlike DGTX, the Huobi Token isn’t compulsory for trading, which doesn’t create a constant demand. The main benefits of holding HT tokens are discounted fees and votation rights. HT holders can participate in the Huobi Autonomous Digital Asset Exchange (HADAX).
The HADAX is the company’s hybrid exchange that lets users vote on which crypto assets they would like to see listed. All voting is carried out in HT tokens. After each round of voting, the company conducts an audit and uses an external investment firm such as Draper or ZhenFund to carry out the necessary due diligence on the coins.
As long as they comply with regulation and quality standards, Huobi will list them on the exchange and voters will receive compensation in the form of free tokens–as well as getting to see their favorite token listed. Since many blockchain projects with voting mechanisms have seen a lack of incentive from users, this is quite a good way to get the community involved.
Huobi Reduced Trading Fees
Like BNB, HT holders can use their tokens to get discounts on commission fees. Unlike Binance, HT tokens can’t be used immediately to get discounts. The Huobi model is a little more complex and makes users pass through a subscription model with multiple tiers. Without the discount, Huobi fees are 0.2% against Binance’s 0.1% for BNB holders.
Once traders pass a certain amount of trading volume and hit the highest tier, Huobi fees match those of Binance. This complicated fee structure is a little offputting at first glance. However, Huobi has longer-term reasoning for this.
Binance commission fee discounts are temporary, after all, with zero fee reductions after five years. And while Huobi requires very high trading volumes to obtain discounts, this exchange is after bigger fish and institutional clients where these discounts equate to large savings in the long run.
Whichever fee structure you prefer out of BNB or HT, you’ll have to admit, zero fees make a much more appealing case! Why give anything to the house at all when you can trade commission-free, not for five years, but forever on futures and spot markets?
Potential Growth of the Huobi Token
Besides the discounted fees and voting rights, Huobi seems to be playing a long game, confident in the longevity of cryptocurrency and the influx of institutional funds.
Huobi also has a further internal mechanism for supporting its token price. Every quarter, Huobi buys back 20% of the exchange profits to but HT tokens and locks them into an Investor Protection Fund. This is effectively to reduce the supply, like the BNB burns, thus making the HT scarcer and more valuable.
Huobi recently announced plans for Huobi Prime, another move to mirror the success of Binance and its launchpad. However, it seems as if Huobi needs to work a little harder on its marketing efforts since the token price failed to explode like BNB upon this news.
Huobi Token vs DGTX
Just like the BNB token, HT is mainly used currently for discounted fees. This is no way near as compelling a use case as DGTX, which is the only way that traders can access the platform. The value proposition of commission-free trading and non-custodial accounts is explosive.
Despite the fact that we are still several weeks from public launch, DGTX has shot past other well-known exchange tokens, such as KuCoin Shares (KCS), with a current market cap of over $58 million, against KuCoin’s $49 million.
We’ll be delivering an in-depth analysis on that tomorrow.
Wrapping it Up
Huobi has set its sights on institutional investors, and with advancements this year in the shape of Bakkt and Nasdaq, Wall Street money appears to be on the verge of flooding in. That could explain HT’s recent bull run.
With the latest announcement of their own blockchain, Huobi is further stepping up to the plate. But Digitex is built for retail investors, and Huobi is fishing in a different market, which makes it an indirect competitor.
The HT token has plenty of use cases, perhaps most importantly, the company shows a belief that cryptocurrencies are here to stay. In the meantime, HT, DGTX, and BNB show that exchange tokens are worth investors’ serious consideration.