Summary: Market conditions have been quite bearish lately, and almost every coin is at or near its yearly low. However, OKB, the native coin of the OKX exchange, has nearly tripled in price since June, an incredibly impressive feat given that the latter half of the year saw the Terra UST collapse and FTX bankruptcy. Let’s ...

Market conditions have been quite bearish lately, and almost every coin is at or near its yearly low. However, OKB, the native coin of the OKX exchange, has nearly tripled in price since June, an incredibly impressive feat given that the latter half of the year saw the Terra UST collapse and FTX bankruptcy. Let’s evaluate what OKB is, why it’s rising, and if this trend could continue.

OKB is the exchange token of the OKX, formerly OKEx, platform. The exchange was founded in 2017 in China but has since become a global exchange with a high daily trading volume typically around $500 million, making it one of the world’s biggest exchanges. The company behind OKX, Ok Group, owns and operates the Okcoin exchange.

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The OKB tokenomics are similar to other exchange tokens, like Binance’s BNB or KuCoin’s KCS. Holders of OKB get a trading fee discount on the OKX exchange of up to 40%, a significant number for high-frequency traders. Additionally, holders can stake their tokens and earn an estimated 5% APY by funding OKX margin loans. OKB token holders also get access to Jumpstart, OKX’s token sale platform where new tokens are sold to the public for the first time. This is similar to Binance’s launchpad and carries serious risk with high reward potential. 

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The OKX exchange helps prop up the value of OKB by participating in a buyback and burn program, where they use 30% of spot market transaction fees to buy back OKB and remove it from the total supply. Even though the exchange’s trading volume has decreased over the past year, as it does for practically every exchange in a bear market, the program provides a significant value proposition for the token. It ties its success to the success of the business. Interestingly, Binance used to have a similar program for BNB but discontinued it after concerns that it made the BNB token a security. This same risk is present with OKB: if its value primarily comes from one entity, it may be a security. This is something to consider before investing in the token, as a security classification would mean that it can only be traded on regulated exchanges in the United States, none of which are currently trading cryptocurrencies.  

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There seems to be no primary catalyst for the recent surge in OKB’s price. A few small reasons exist, such as OKX’s dedication to transparency and proving that they hold their reserves, unlike FTX. Additionally, they have lofty expansion plans, including expanding their offerings to Dubai. In an environment where all coins are rapidly decreasing in value, having an established and strong company able to back a token provides a level of security to investors. This same phenomenon was seen during the previous bear market, in which BNB cemented itself as a top cryptocurrency primarily due to its backing by Binance.

OKX also created OKC, a layer 1 blockchain built on Cosmos. It’s compatible with the Ethereum Virtual Machine and the InterBlockchain Communication protocol, meaning that any Ethereum smart contract can be deployed on the chain and be interoperable with the Cosmos ecosystem. An OKC token acts as the native asset to this chain, and it has no relation to OKB. However, the two are intertwined by having the same parent company, and the success of the OKX exchange will likely bring value to both OKB and OKC.

Looking at why OKB has value is similar to any other exchange coin, especially Binance’s BNB. The safety and stability provided by having a company behind a token are enticing, especially during a bear market. The main risk with an exchange token is the potential that it is one day deemed a security by government agencies. Regardless, betting on the casino in a depressed market is a safe bet, and clearly one that many investors are making given OKB’s recent price action.

By Lincoln Murr