OKB has not touched the price roof yet

[NateWong0929]

OKB’s seventh round of buyback & burn was just conducted after OKEx announced that it had burned 700 million unissued platform tokens. The amount this time has an increase of 16.67% compared to the previous round of buy-back & burn, equivalent to 17.5 Million US dollars.

OKEx has become the first trading platform to burn unissued tokens which doubtlessly pioneered a new field of competition among top exchanges. According to the news, Huobi was the second top exchange to answer the action with the release of its testnet and no news from Binance yet.

Will burning the unissued platform tokens be the solution to the exchange or just another hype way?

Billions of Dollars in American Stock Market are used to buy back and drive up stocks
The SEC has opened legal channels for stock repurchases since 1982. Corporate’s buying back will reduce the number of outstanding stocks, increase earnings per share, and drive up price at the same P/E valuation.
According to the data, in 2018, the buybacks of the US-listed company reached 1.085 trillion dollars, accounting for 3% of GDP.
Around 1982, US-listed companies used only 4% of their profits for repurchase, and in the seven years from 2011 to 2018, this number increased to an average of 53.7%.

This chart tells that the S & P 500 buybacks and dividends are gradually becoming equal to operating profit.

IBM grew rapidly in the 1950s and 1960s. In the mid-1970s, IBM held large amounts of cash. However, because of the lack of potential projects and companies to invest, IBM bought back IBM’s stock for a total of 1.4 billion dollars in 1977 and 1978. From 1986 to 1989, IBM company repurchased her shares totaling up to the US $ 5.66 billion, with an average dividends/payout ratio of 56%.

The business income of "Auto Zone", an American auto parts manufacturer, has not grown significantly for decades, but earnings per share rose 36 times higher. The stock price has risen from $ 26 to a peak of $ 1,274, and the stock price has risen 4,800%.

The reason may be that the company’s management generously repurchased and canceled the company’s shares, and promised to buy back a minimum of 5% of the outstanding shares annually. In some years, the repurchase rate reached 8%.

Over the past 19 years, the number of outstanding shares has fallen from 14 million to 2 million, a deflation of 7 times, canceling 86% of the shares, and the stock price has soared.

The deflation model and changes in demand & supply have a strong and significant impact on the price as told by the above events.

OKEx led a buyback & burn fashion and exchanges follow

On February 10th, with the announcement of "OKChain testnet is live”, the long-awaited and tedious section of platform tokens was shed spotlight and threw to the center of a vortex.

In addition to revealing the development direction of the OKChain, the announcement also throws a blockbuster in the market, which is the burning of the unissued 700 million OKBs. OKB has become the world’s first fully circulating platform token since then. The news immediately made the market full of long OKB.

Based on the OKB price on the date of the announcement, the market value of the burned OKB was as high as 3.5 billion U.S. dollars, which created the largest burning amount of platform tokens.

The burning led to a sharp reduction in the outstanding tokens, and the price of OKB skyrocketed immediately. As of 11:00 on February 11, the 24-hour increase of OKB reached 46%.

OKEx’s leading effect has attracted the attention of other trading platforms. Subsequently, the ZB Exchange issued an announcement saying that it would burn the 293 million ZB tokens held by the team and burn 107 million ZBs for the user protection fund. FCoin issued an announcement saying that it would burn 720 million FTs held by the team. Affected by the market opinions, Huobi quickly released an announcement named "Huobi Chain Testnet and Huobi Token New Rules Will Go Live" on February 10, and officially released the new rules on the last day of February with 147 million burned HT in total. Besides, MXC exchange and Gate released news about burning platform coins.
At present, only has Binance not modified the destruction rules at all.

The total amount of burned tokens by the three major trading platforms reached $ 4.6 billion US dollars, and OKB accounted for 76%

After Binance issued the platform token, BNB, in 2017, the era of burning began. Huobi and OKEx launched the platform tokens in the form of “points” in 2018 and joined the burning competition in 2019.

Based on the price at the time of burning, the total value of the burned tokens by three exchanges was worthy of US $ 4.659 billion, of which OKEx accounted for the highest proportion, accounting for 76% with US $ 3.551 billion, ranking No.1.

The total number of burned BNB was 16.7415 million. Based on the BNB price at each burning, the total value was 248 million US dollars.

The total number of burned HT was 119.3544 Million. Based on the HT price at each burning, the total value was 860 million US dollars.

The total number of burned OKB was 717 million. Based on the OKB price at each burning, the total value was 3.551 billion US dollars.

BNB is currently off the queue. The market is also looking forward to whether Binance will catch up and have a further burning.

What cards in hands besides continuous burning?

Currently, OKEx and Huobi have attained the stage of an absolute deflation. The future buy-back & burning will tell the platforms’ profitability. At present, HT’s and BNB’s buyback & burn quota are 20% of "revenue" and "profit" respectively. This concept is a bit vague. After all, nobody knows the exact number of the profit reports of these two exchanges.
The main income for exchanges is "transaction fees" and "service charge (listing fees/discounts/new token sales/UP sales)". As for the way of financial statistics of exchanges, it is temporarily unknown.

However, due to the buyback & burn quota of OKEx only involving one single dimension - fees happened in basic crypto tradings (spot trading), it resulted in a display of a lower amount of burned OKB in the past single month.

Currently, OKEx’s products also include spot margin trading, leverage transactions, perpetual swaps, and futures. The largest part of the revenue is lying in perpetual swaps.

"What we want to do is a long-term business, so we will never do things that overdraw the future value. The support for OKB's value has not changed, and we will still use the revenue of the OKEx platform to execute the buyback & burn scheme. " OKEx Chief Strategy Officer, Xu Kun, said in an interview with the media, and also mentioned that considering to use swaps revenues to repurchase OKB.
Undoubtedly putting the revenue of products such as future swaps into the buyback plan will be a trump card of OKEx.

Conclusion
From decades of experience and history of US stocks, it can be seen that the way of repurchase and destruction is conducive to market development and stock prices rising. OKEx has played a pioneering role in the matter of bringing platform tokens into an absolute deflation. At present, the market is waiting for the voice of Binance, but it is worth mentioning that in the second quarter of last year, Binance temporarily changed and did not repurchase from the secondary market to burn, but instead burning the tokens held by the team, about which the market and communities raised a lot questions. Regularly buying back and burning platform tokens by the published rules and achieving absolute deflation, and constantly optimizing platform services are all actions that empower platform tokens. The competition among the exchanges is a Marathon. In the short term, this burning war is a major thing. In the long term, it is the market trend.