The cryptocurrency market differs from other markets in the presence of high volatility. This is facilitated by several factors that directly or indirectly affect the growth / fall of the cryptocurrency price.
First of all, the value of a cryptocurrency determines its mass character: the more users it has, the higher the price. The projects with the largest number of users are in the first positions:
- Ether (ETH), the number of transactions per day reaches almost 1,000,000. For example, on July 5, 2020, 880,075 transactions were made on the ether blockchain.
- Bitcoin: 274,104 transactions completed on July 5th.
Listing a project on an exchange is a sure way to increase the number of users of your cryptocurrency and thus increase its value. Therefore, listings, including binance listing, are very important for crypto project owners.
Let’s understand how this happens, how the listing affects the price and what it means for the investor.
What is crypto listing
Listing a coin or token on a crypto exchange means that users will be able to use it for their trading and investment operations – freely buy or sell. This increases the liquidity of the token, especially if it is listed on a popular exchange with a large number of users.
The listing also has a marketing component. When listing a new token, the exchange usually makes an official statement. News resources pick up this event – thus, the listing helps the team to attract attention to the project of investors and token holders.
How is the listing on the stock exchange
Let’s say we created a blockchain project and issued our own token called DIS on the Ethereum (ERC-20) platform. We conducted an ICO, where we sold tokens to investors, thus receiving $25 million from them.
Now we have to prove to investors that our project is not a scam (fraud). This can be done by launching a blockchain product and creating the value of a token. But we cannot launch the product yet – it is still in development.
The more time has passed since the end of the ICO, the more distrust of investors and the community grows. They want to be sure that they did not buy candy wrappers, but something worthwhile that can be sold at any time on the market.
Investor distrust is fraught with the premature death of the project. To take the pressure off, we need to create value for the token by creating supply and demand for it. In other words, bring it to market. You can do this through the exchange. Therefore, we need to list our token on as many of these exchanges as possible.
We study the list of exchanges and the volume of their daily or monthly trading.
Usually, the project at the initial stage chooses several small exchanges and one of the top 10. The fact is that listing on exchanges is paid (more on this below) – and the larger the exchange, the more expensive you will have to pay. We can’t immediately spend all the money on listings on major exchanges, can we? Therefore, we choose one and dozens of leaders – let it be the Korean Bithumb.
Next, we apply for listing. If, after consideration, Bithumb accepts it, we will be sent an invoice for the listing fee. After the payment, the exchange carries out the technical connection of DIS to trading and informs us about the start time of trading. We make an official announcement that our token will appear on Bithumb on such and such date. On the day of the start of trading, the exchange itself also makes a statement. Now you can trade our token!
The impact of listing on the price of a token
As a rule, the price begins to react to the news about the listing on the stock exchange not at the moment of the opening of trading, but already at the moment the news about the listing appears.
A classic example: on May 29, 2020, the American exchange Coinbase on its Twitter publishes the news that trading in the Maker cryptocurrency (MKR) will open from June 8. The opening will take place in several stages – as liquidity increases.
This is how users reacted to this news on another cryptocurrency exchange HitBTC: at the moment, the price for 1 MKR reached $499-500.
By June 9, 2020, the price rose to $678, after which it gradually rolled back to $500. Prior to the listing announcement on Coinbase, the price of Maker (MKR) cryptocurrency did not exceed $355. That is, on the HitBTC exchange, the price of the token has almost doubled.
Another example is Everipedia (IQ) listing on Binance. The growth of the IQ token against the background of this news amounted to 85%.
Listing is not always accompanied by an increase in the price of the token. If the listing on the first exchange occurs immediately after the ICO, some investors who invested in the pre-ICO or ICO stage will want to take profits. And large sales, as you know, can lead to a price reduction – unless, of course, those who want to buy tokens buy everything from the sellers.
Example: listing of the KyberNetwork (KNC) token on the same Binance. It was the first exchange for KNC after the ICO. After entering the exchange, the rate of the KNC token has been declining for several months:
The price of a token can be influenced simply by listing rumors. For example, on March 3-4, 2018, the media began to write that Ripple (XRP) could soon enter Coinbase. Against the backdrop of these speculations, on March 5-6, the price of XRP rose markedly, and after March 8, it fell below the original price:
This situation looks like media manipulation. The Ripple administrators themselves could dissolve the rumor in order to increase the price of their currency in this way. Moneymakers could also be behind this.
By the way, Coinbase added Ripple (XRP) to its platform only a year later – in February 2019.
Delisting from the exchange
Going public is half the battle. She still needs to stay. For a number of reasons, large exchanges can delist projects. Let’s consider them.
Small trading volume
One of the most common reasons.
When traders or investors lose interest in a token/coin, it also becomes unnecessary for a crypto exchange, because commissions are one of the sources of income for the exchange. And if the trading volumes are small, then the amounts of commissions are negligible.
In February 2019, Binance announced the delisting of the CLOAK token from the Cloakcoin project. At its peak, at the end of December 2017, Cloakcoin’s capitalization reached $154 million. After the collapse of the crypto market in early January 2018, the project lost 98% of its value. Trading volumes on stock exchanges dropped significantly.
In July 2019, Bittrex also delisted CLOAK. At that time, the daily trading volume for the BTC/CLOAK pair on the YoBit and BitRabbit exchanges did not exceed $10.
Scandals related to the project team
Exchanges can unilaterally terminate the agreement with the cryptocurrency project and delist the token due to the participation of the latter in a scandalous event. This has happened with several projects.
In 2016, cryptocurrency startup BitConnect at its peak reached $2.55 billion in capitalization with a token price of up to $460. However, amid accusations of fraud by Texas regulators and a hacker attack that led to the loss of some of the funds and suspiciously coincided with legal proceedings, the BCC rate fell to $10 in a few days, and cryptocurrency exchanges began to delist the token.
Another example: in 2018, there were rumors about pump & dump manipulation by the Bytecoin team when listing on Binance. Then the price of the token rose by 160% in a matter of hours. After that, Binance announced the delisting of the BCN token, and three days later the OKEx exchange did the same.
Cryptocurrency exchanges periodically analyze projects whose tokens are presented on their trading platforms and get rid of those who could not achieve obvious success.
Summer 2019. Cryptocurrency exchange Bittrex delists 8 cryptocurrencies at once (MUSIC, ABY, etc.), and then 9 more.
Most of the removed tokens / coins were not included in the top 1000 in the CoinMarketCap rating by capitalization at that time and could not seriously declare themselves for a long period. Typically, projects of this kind are traded on one or two exchanges, so delisting significantly affects the price.
Cryptocurrency exchanges closely follow the news from regulators and often comply with their requirements and recommendations in order to avoid problems.
In the summer, the Financial Action Task Force (FATF) published instructions on the regulation of cryptocurrencies, in which member countries are recommended to oblige crypto exchanges and similar services to store and transfer customer information.
After that, on October 10, 2019, the OKEx exchange announced that it was delisting five cryptocurrencies at once, allowing private transactions: DASH, Monero, Zcash, Horizon, Super Bitcoin. OKEx stated that anonymous cryptocurrencies interfere with the collection of information and therefore are subject to delisting. Also, the delisting of anonymous coins was carried out by Upbit and Coinbase.
How delisting affects the price
After delisting, the price of the token most often goes down. In January 2018, the Bittrex exchange announced the delisting of the Mysterium (MYST) cryptocurrency. The price dropped from $3.20 to $0.8-0.9. The portfolios of MYST investors instantly decreased by three times.
In order for the token / coin to start trading on the exchange, you need to pay for the listing. This is a kind of “entry fee”.
Rumor has it that in addition to this, the exchange also requires teams to make small monthly payments. If you do not pay, the token will simply be removed from the auction, and subsequently delisting will occur. The teams themselves do not comment on this moment.
If a cryptocurrency project at the ICO stage has raised a significant amount, then listing on a major exchange is a reasonable decision. But if the collected amount is small, it is inappropriate to spend all the funds to get on a large exchange.
How to make money from listing
Since listings are likely to affect the price of the token, information about the upcoming listing on the exchange can bring profit in the short term. But where can I get it?
First of all, the upcoming listing is reported on the official resources of the project – first of all, in the Telegram chat of the community. In such chats, team members often share information about negotiations with exchanges, terms, listing amounts. True, the names of the exchanges are not mentioned until the last.
Therefore, if you want to make money on listing, you should monitor chats and announcements from project management.
Balance sheet analysis
Some analysts are trying to identify the upcoming listing using the blockchain, where balances with bitcoin or ether are publicly available.
The wallets that store the project’s cryptocurrency collected at the ICO are known to the project community. Their addresses are driven into the Telegram bot to track movements. If an amount that corresponds to the amount in the table above is debited from the project wallet, it means that payment for listing has occurred. Now we know what the token will be listed on the exchange in the near future, and we know what kind of exchange it is.
It is easy to check the guess: the address of the exchange can be easily determined by the large number of movements of cryptocurrencies per day. In addition, some addresses have the name of the exchange.
As for delisting, only employees of the exchanges have information. Often the project management is not aware that their token will soon be removed from the auction. So it was with the Mysterium (MYST) cryptocurrency. When Bittrex announced the delisting of MYST, questions to the management about the reasons, plans, etc. rained down in the Mysterium Telegram chat. The admins said that they did not know the reason for the delisting, and the exchange ignored the request.