MEXC In-Depth Research Report: Exchange Valuation Model and Risk Framework Analysis Under Zero-Fee Strategy

Executive Summary

MEXC is a globally recognized centralized cryptocurrency exchange founded in 2018, serving over 40 million users across 170+ countries with 3,000+ listed trading pairs. The platform has established itself as a top-tier exchange ranked #7 globally by trading volume, driven by its broad altcoin coverage, rapid listing strategy, and promotional zero-fee structure. The core economic model remains fee-based, but current zero-fee promotions have shifted focus toward user acquisition and ecosystem scaling through MX token utility and ancillary services. Key risks include regulatory pressures in major jurisdictions (e.g., exclusion from US, China, Singapore), custodial opacity despite strong proof-of-reserves ratios, and high dependency on market cycles. Valuation is volume-sensitive, with enterprise value estimated in the multi-billion range based on cash flow projections. Investment conviction is medium, conditional on regulatory clarity and sustainable volume retention beyond promotional periods.

Bull Case Probability: 30% | Base Case Probability: 50% | Bear Case Probability: 20%

PHASE 0 — ECONOMIC CLASSIFICATION

Step 1 — Economic Structure

MEXC operates as a centralized digital asset trading intermediary, functioning as a custodial exchange that aggregates order flow, provides custody services, and offers leveraged products. It is not a native protocol or DeFi entity but a fee-based intermediary with balance-sheet participation through margin and lending facilities.

Economic Class:

• Centralized trading platform (exchange)
• Fee-based intermediary with asset custody
• Balance-sheet participant via margin/leverage products

MEXC does not issue currency or synthetic assets but acts as an off-chain broker-dealer for digital assets.

Step 2 — Valuation Framework Selection

Appropriate Model: Discounted Cash Flow (DCF) Model
Justification: Revenue is primarily transactional, derived from trading fees, derivatives, margin interest, and ancillary services. Cash flows are tied to volume and market volatility, making DCF suitable for valuing sustainable net operating income. A reflexive liquidity model supplements for MX token valuation, but core enterprise value is cash-flow-oriented.

PHASE 1 — FACT BASE CONSTRUCTION

1.1 Protocol Overview

Protocol Description: MEXC is a global centralized cryptocurrency exchange established in 2018, offering spot trading, derivatives, leveraged ETFs, copy trading, staking, and launchpad services. It is known for rapid token listings and deep altcoin markets, attracting users seeking breadth and early access.
Launch Date: 2018
Core Products: Spot trading, derivatives (futures with up to 500x leverage), leveraged ETFs, copy trading, staking/Earn products, token launch events (Launchpad), API trading.
Supported Chains/Interfaces: Web and mobile applications; custodial wallets interface with multiple blockchains (e.g., Ethereum, Morph L2).
Collateral Model: Custodial—user assets held in MEXC wallets to support trading and margin positions.
Peg Mechanism: Not applicable.

1.2 Scale and Usage Metrics

Notes: Precise balance sheet data (e.g., liabilities, margin book) is not publicly audited. Volume data is proxy-based from aggregators.

1.3 Revenue Model and Economic Structure

Revenue Sources:

• Spot trading fees (standard: 0% maker, 0.05% taker; currently promotional zero fees)
• Derivatives fees
• Margin interest and lending spreads
• Staking product spreads
• Launchpad fees and token sale income
• API/bot trading fees

Revenue Quality Assessment:

Current Promotional Impact: Zero-fee structure on all spot pairs (0% maker/taker) is temporary and drives volume growth but reduces immediate fee income. Ecosystem products (e.g., staking, launchpad) aim to offset this via user retention.

1.4 Tokenomics and Supply Structure

MX token exists as a utility token for fee discounts and ecosystem participation, but it does not directly capture revenue share.

MX Token Details:

• Circulating Supply: ~92M MX (as of 2026-02-24)
• Total Supply: 409M MX
• FDV: ~$742M (at $1.79/MX)
• Utility: Fee discounts (up to 20% with MX holding), participation in launchpad/kickstarter events, staking rewards.
• Deflation Mechanism: Active buyback-burn program using 40% of platform profits to maintain circulating supply below 100M MX. Q3 2025 burned 2.58M MX; Q4 2025 burn ongoing.
• Value Accrual: Indirect via ecosystem growth rather than direct cash flow rights.

1.5 Team, Governance, Capital Structure

Founders & Management: Led by a team with exchange operations experience; low public profile. COO Vugar Usi Zade is active in public communications.
Investors & Capital Raised: $1.6M in historical VC funding (2022) from Binance Labs and YZi Labs. No recent funding rounds disclosed.
Governance Model: Corporate governance under MEXC Global, headquartered in Seychelles. Not decentralized (no DAO).
Legal Structure: Registered entity operating globally but restricted in jurisdictions like US, China, Singapore.
Execution Credibility: Operational since 2018 with resilience across market cycles, though custodial risk remains a concern.

PHASE 2 — STRUCTURAL ANALYSIS

2.1 Value Accrual Analysis

Does MEXC capture value? Yes, through net trading revenue, derivatives fees, and ancillary services.
Token value capture: Medium—MX utility drives ecosystem engagement but lacks direct revenue share, relying on reflexive demand from fee discounts.
Value Flow: Traders → Fee Income → Operating Profit → Retained Earnings / Buybacks (for MX burn).
Accrual Strength: Strong at corporate level; medium at token level.

2.2 Balance Sheet Risk Model

Assets:

• Custodied crypto holdings (PoR ratios >100%: BTC 267%, ETH 112%, USDT 117%)
• Insurance/Guardian Fund: $526M
• Margin collateral holdings

Liabilities:

• User account balances
• Margin positions
• Derivative obligations

Key Ratios (Proxy):

• Custody asset coverage: High (PoR >100%)
• Liquidity: Strong based on volume and PoR

Systemic Fragility: Custodial risk dominates due to lack of full asset segregation transparency. Guardian Fund provides some buffer.

2.3 Competitive Landscape

Moat Assessment:

• Strengths: Token breadth, rapid listings, low fees, global retail reach.
• Weaknesses: Regulatory exclusion, custodial opacity.
• Moat Score: 6/10

2.4 Narrative Alignment and Catalysts

Catalysts:

• Bull market volatility cycles
• Derivatives adoption growth
• AI trading suite expansion (2.35M users in first 6 months)
• Product innovation (e.g., structured products)

Timing: Correlated with crypto market cycles and risk appetite.

2.5 Risk Assessment

PHASE 3 — VALUATION FRAMEWORK

3.1 Appropriate Valuation Model Selection

Model: Discounted Cash Flow (DCF) based on net fee income.
Net Fee Income Formula: (Blended Fee Rate × Volume) – Operating Costs – Risk Provisioning

Scenario Modeling (Updated with Current Data):

• Current 24h volume: $10.56B → Annualized: ~$3.85T (exceeds initial Bull case of $2T)
• Blended fee rate: 0.12% (bear), 0.15% (base), 0.18% (bull) — accounting for promotional periods.
• Net margin: 25% (bear), 30% (base), 35% (bull) — based on operational efficiency.

3.2 Discount Rate Determination

• Risk-free rate: 4.5%
• Custodial & Crypto risk premium: 8.0%
• Regulatory risk premium: 6.0%
• Volatility premium: 6.5%
• Estimated WACC: ~25–28%

3.3 Scenario and Sensitivity Analysis

Enterprise Value Calculation (PV of Net Income):

• Discount rate: 25% (base), with sensitivity at 20% (low) and 30% (high).

Valuation Insight: Current volume run-rate supports a base enterprise value of $4-5B, with upside to $8-11B in Bull scenarios. Zero-fee promotions may compress short-term margins but drive long-term ecosystem value.

3.4 Liquidity Adjustment

MX token FDV is $742M, but with low direct revenue accrual, token valuation is reflexive. Apply 20-30% discount for liquidity risk if using token-based multiples.

FINAL OUTPUT

Key Metrics Dashboard

Monitoring Checklist

• Regulatory Developments: Changes in key markets like US, EU, Asia.
• Withdrawal Patterns: Signs of liquidity stress or bank runs.
• Fee Structure Shifts: Transition from zero-fee to standard fees.
• Volume Trends: Sustainability of current volume levels.
• MX Token Metrics: Burn rate, utility adoption, and price action.
• Security Incidents: Hacks or loss events.

Conclusion

MEXC demonstrates strong operational scale with 40M+ users and top-7 global ranking, driven by a broad product suite and aggressive promotional strategies. The temporary zero-fee model has accelerated volume growth but introduces near-term revenue compression, shifting value accrual to ecosystem services and MX token utility. The deflationary MX mechanism and robust proof-of-reserves (e.g., BTC 267%) enhance credibility, but regulatory risks and custodial opacity remain significant concerns. Valuation is highly sensitive to volume retention post-promotions, with a base enterprise value of $4-5B achievable under current conditions. For institutional investors, MEXC represents a medium-conviction play in the crypto infrastructure sector, suitable for a 1-3% portfolio allocation in expansion phases, contingent on monitoring regulatory developments and volume sustainability.

Investment Recommendation: Hold with caution; prioritize entries during market dips or post-regulatory clarity.