Tokens: who will be flooded, and who will end? CoinMarketCap and Cobinhood

The listing of tokens on the exchange could never be called a transparent process. The industry is full of all sorts of speculations and rumors, and the recent letter of accusation of Binance in a bribe of 400 BTC for listing has become, perhaps, the apogee of "conspiracy theories about listing". It is not surprising that such situations arise more and more often: the number of dubious coins and tokens is growing every day, forcing cryptobirds to choose those who deserve to be among the most traded assets. Especially for the Blockchain Journal journal, economics researcher, Betmatch chief research officer Vasily Sumanov and Akropolis communications department director Olga Grinina studied the listing policies of several major exchanges.

Dummy Altinye flooded the market

One of the driving forces behind the crypto table in 2017 was the explosive growth in the number of start-ups producing ERC20 tokens . This happened for two reasons: the convenience of creating decentralized applications in the Ethereum network together with the ability to attract investors long before the development of its own decentralized protocol, network or application. As a result, the stock market quickly found itself flooded with "freshly printed" tokens. At the same time, a problem was discovered – there is no necessary amount of liquidity in the market to ensure trading. The glut of the market with new tokens led to a natural process – the exchanges began to block off the listing of new trading pairs.

The increase in the number of tokens offered to the market occurred simultaneously with a decrease in their “quality”. The fact is that the tokens of most startups have no value: there is no working product yet, and in this situation the token is a “digital dummy” on the stock exchange. The extremely high number of requests related to listing of tokens, combined with the presence of huge budgets, has led to a rapid increase in listing fees. In addition, the classic black market of intermediaries and lobbyists has been formed. Making decisions on listing tokens of specific projects is often an extremely non-transparent procedure, followed by market manipulations with the price of an asset, well known as “pamp and dump” schemes . To find out what the "real" criteria for listing tokens by exchanges are, experts asked for official comments from a number of exchanges and the most popular analytical service – CoinMarketCap.

So what is the listing policy really?

It should be noted that not all exchanges are selective in their listing. The number of pairs traded on such sites as Yobit (3334 trading pairs according to coinhills.com) and HitBTC (620 trading pairs) is really impressive, which unfortunately cannot be said about the trading volumes. This is an indicator that the market shows no interest in most of these coins and tokens. Other sites, such as Bitstamp, Bitflyer, GDAX or Gemini, cannot afford such luxury (primarily due to legal restrictions).

Detailed official information on the topic of listing new assets is not publicly presented on any of the exchanges. Based on a series of interviews with representatives of CoinMarketCap, Cobinhood and Exmo, as well as data from Bittrex, Huobi, IDEX, OKEx and GDAX information resources, the experts identified five main criteria:

To maximize the position of those who are directly responsible for adding new tokens to the stock exchange, several questions were asked:

• Does it matter to you that the token is already being traded on other exchanges and the volume of its trades?
• Do you work as a liquidity provider?
• Are you planning to add new types of tokens, for example ERC721 and new coins with stable value (stablecoin)?
• What type of digital assets now dominates among those traded on your exchange? Utility tokens, classic cryptocurrencies or blockchain protocol tokens?
• Do you have candidates for delisting? What event are the trigger for a similar procedure?

Minimum requirements for tokens

Some responses from stock exchanges turned out to be quite predictable. So, answering a question about the minimum requirements for a token, the listing manager of the Cobinhood Exchange mentioned “enough funds collected by the ICO to guarantee minimum liquidity, compliance with the SEC requirements, as well as a legal opinion that the token is not a security” . Next was mentioned the audit of whitepaper and smart contract, checking the status of social networks and the quality of work with the community.

A representative of CoinMarketCap , responsible for content and listing, also noted the absence of an active community and developed social networks, as well as the team’s dubious biography (or lack thereof) as key “red flags”. That is why CoinMarketCap practically does not add various financial pyramids disguised as master nodes and other dubious coins and tokens to its asset register.

Key factors: community around the token and expected demand

The presence of a steady and growing demand for a token is one of the key factors for the exchange's interest in listing a new trading pair. However, one should not forget about the community of the exchange, the development of which can be positively influenced by a new added digital asset. Will the exchange be able to increase its own community and, as a result, trading volume? Will she receive additional mentions in the media in connection with a successful project? In today's world, everyone is interested in quality PR and community development around their project. However, the degree of PR is still determined by the ratio of the communities of the exchange itself and the token: for example, much more people definitely learned about Exmo after TRON was added to the list of tradable tokens.

But Binance is unlikely to get a similar effect from a little-known project. In this case, it is the stock exchanges that most often find themselves in a strong position, since it is they, in fact, that help grow an additional community of traders around a new asset. Many tokens and projects became generally known to the mass trader only after they were added to the Binance listing. With each new listing, large exchanges seem to indicate to the crypto community which assets, in their opinion, have the greatest potential and will be in demand in the future.

It is quite natural that in such competitive conditions each exchange is forced to literally fight for its user and customer base, and therefore now more than ever before the quality of the product – that is, the assets being traded – comes to the fore. This is especially critical for local exchanges, which sometimes include even more stringent requirements in their requirements for tokens than their global competitors. Thus, during the interview, the director of EXMO Sergey Zhdanov confirmed that in order to join the ranks of their list of tradable assets, the token should have an open source code and ensure trading volume of at least $ 250,000 per day. Other criteria, including the Telegram followers database (> 15,000 active users) and the team's impeccable reputation, were also mentioned.

Do ubiquitous rumors about paid listings of dubious projects have justification?

“For us there are no special cases, we do not make exceptions, since we primarily value our reputation. Each token and project is fully qualified. We try to meet personally with the founder and the team of each project, ”says EXMO.

A cursory analysis of the trading pairs of many exchanges shows a completely different picture – the pipeline listing of questionable projects is put on stream and, apparently, is one of the most significant items of income. The reader himself can understand which exchanges we are talking about (a hint is a lot of trading pairs and small volumes on most of them).

The representative of CoinMarketCap also confirmed that the listing procedure in the register of this analytical service is quite complex and multi-stage.

“To add a token to our list of tradable assets, a mandatory first step is to fill out an application, in which we have tried to take into account basic issues and criteria. We are in correspondence with each project representative. Only having collected the basic and in some cases additional data, we make the decision with the whole team, ” he said.

ERC21-tokens and stablecoins: “digital avalanche” of new assets?

Experts also asked which new classes of digital assets representatives of stock exchanges consider most interesting for adding to their trading platforms in the future. The favorites are the tokens of the standard ERC21 and stablecoins.

Non-interchangeable tokens are still undervalued by the community. However, their importance for the gaming industry, asset tokenization and a number of other applications is hard to underestimate. Such exchanges are interesting to exchanges, again, if there is a community in the root project-issuer and a sufficient level of liquidity. During the interview, EXMO representatives stated that they would rather soon add the first group of tokens of the ERC721 standard to the list of traded assets. CoinMarketCap also confirmed their intention to embed the first ERC721 non-fungible tokens due to the growing community interest in this new class of digital assets. Separate sections within the resource will be created for this.

The industry is actively developing, new standards and asset classes are emerging from an economic and technical point of view. The exchanges view stable coins as an additional tool for depositing and withdrawing funds, since it allows them not to engage in interaction with traditional financial institutions, shifting the problem of exchanging a stable coin for fiat money to the issuer, if it is issued centrally. In the case of decentralized emitted stable coins like Dai, the task of working with Fiat is shifted to the end user.

Current practice shows that the scandalous and community-critical USDT (Tether) is no longer alternative. After the terrifying fall in prices of Tether USD (the price reached $ 0.86, having lost almost 15% of its “stable” value) amid rumors about its delisting from a number of large exchanges, the problem of creating a digital asset that will be truly stable and enjoy the trust of the community and business.

Already, on the giant Binance and the notorious Bittrex assets are traded in pairs to True USD , and Poloniex added Circle USD . Asian exchange OKEx added four stable-koin . At the same time, a coin without a centralized security, stablecoin Dai , despite the small volume of trades, has already been added to HitBtc, Bibox and Bitfinex – Ethfinex, a subsidiary of the Bitfinex exchange, and managed to be noted with investments from the “same” Andreessen Horowitz fund (a16zcrypto).

Given the growing number of projects related to the creation of stable coins, together with their need for successful integration of the traditional economy and the blockchain industry, it is safe to say that the boom of the stable-coin is still ahead.

What tokens will come delisting soon?

The situation that has developed on the market at the moment – namely, that many exchanges are overloaded with tokens of dead and scam projects, will obviously lead to the fact that the delisting of assets will become a routine procedure. This practice began back in January, when Bittrex began each month to announce lists of trading pairs for deduction from its portfolio. And already in March, as many as 17 altcoins were removed from Poloniex without a clear explanation of the reasons, except for general phrases about “an insufficient user base and audience coverage”. In the meantime, OKEx has even recently published the “delisting policy”.

It is obvious that no single exchange can function and make a profit without a sufficient amount of liquidity. Accordingly, the token’s “ability” to bring a constant stream of commissions is constantly monitored, and the more the token is bought and sold on the exchange, the more the exchange earns. Each trading pair is considered as a kind of asset that must generate income: if this does not happen or does not happen sufficiently, sooner or later it leaves the portfolio.

Those exchanges with which the experts were able to talk, really confirmed that they removed some of the least profitable and sought-after assets from among the traded ones, and also plan new delisting. Cobinhood confirmed that those tokens that demonstrate low trading volumes are automatically at risk. In addition, there are “tokens that for a certain period have not created a working product and do not have an active audience.” It was also said, truth without specific names, that the new wave of delisting is just around the corner.

However, not everyone is so categorical. So, CoinMarketCap recognized that they do not plan to delist in the near future, giving a fairly reasonable argument.

“We are trying to reflect the full picture of the situation on the market for our users, who should be aware of all projects, even those that are not the most successful,” the project team said.

What conclusion can be drawn from all this? Any exchange, regardless of its location and scale, primarily seeks to multiply its user base and maintain a stable trading volume. At the moment, the most promising new types of assets in terms of both technical use and their economic potential, representatives of the exchanges consider stable coins and non-fungible tokens. Probably in the future they will become the main new candidates for the addition of successful projects after protocol tokens and utility tokens.

As for the practice of delisting, it will definitely gain momentum. The cryptocurrency market is overloaded with dubious assets, and restoring order is a logical procedure. It should be understood that the loss of a cherished place on the stock exchange can be fatal for any token, because along with every delisting, especially from a large stock exchange, there is a loss of liquidity. Such a blow is unlikely to withstand any novice project.

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