Binance 2018 profits estimated at $446 million – below predictions, still high
The bear market seems to be dividing cryptocurrency exchanges between the haves and have nots.
The Block has estimated Binance's 2018 profits at $446 million, a shade below the guesstimate of $500 million to $1 billion that Binance CEO Changpeng Zhao gave Bloomberg halfway through the year.
The numbers are a glimpse of how cryptocurrency markets have consolidated around fewer exchanges over time during the course of a bearish 2018. Some exchanges are floundering, and others are revealed to have likely been teetering on and over the edge for most of 2018. But there are still a lot of traders out there.
By the numbers
While Binance doesn't directly disclose its financials, its Binance Coin buybacks and burns are transparently orchestrated, with Binance using 20% of its net profits to buy back BNB and releasing a disclosure report after the event.
So as The Block says, Binance's quarterly profits are simply five times the USD equivalent of each quarterly burn, if it's following the commitments laid out in its whitepaper.
The result shows a monumental time at the end of 2017, which then dips over the course of the year. According to the methodology, Binance's profits were about US$50 million in Q4 2018, compared to about $200 million in Q4 2017.
The picture of declining revenues likely isn't as gloomy as it would appear on the surface though, and in some respects is a quite positive result.
Firstly, Binance has a lot more irons in the fire now than it did previously, and some of them are probably pretty expensive. These include investments in crypto partners, a new blockchain and decentralised exchange, Binance Uganda, a new fiat exchange in Jersey and doubtless many more. The company's costs are almost certainly much higher now than they were a year ago.
Secondly, the decline in cryptocurrency has a way of turning into bigger losses on paper. The enormous apparent jump in revenue between Q3 and Q4 may not have been entirely more customers and more trading. Rather, quickly rising prices can turn profits into even bigger profits between the time you earn it and the time you account for it. As prices run back down, it could go the other way.
Cryptocurrency has a lot of room to run, at least on the winning exchanges.
Disclosure: At the time of writing the author holds ETH.
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