Exchange listings are overrated

Exchange listings are overrated

Exchanges. Where would we be without them? Who would charge companies obscene fees for listings that systematically result in temporary spikes in trading volume before becoming utterly impractical?

Though not all exchanges follow this scenario, it appears that the digital asset trading platforms of today are primarily focused on short-term gains, costing blockchain enterprises absurd amounts of resources in exchange for interim spikes in popularity and fabricated volume.

In this article we will expose a small research we conducted on 64 of the top 100 exchanges as per CoinMarketCap data. What we did was analyze the trading volume for a single given day (April 17th, 2019) and look for pairs with a trading volume below $1,000 and $10,000.

While the research is by no means extensive, it did produce some interesting results.

Research highlights

For those in a hurry, here are some key insights:

  • On average, 30% of all trading pairs had less than $1,000 daily volume.
  • On average, 47% of all trading pairs had less than $10,000 daily volume.
  • 16 of the exchanges had 50% or more trading pairs with less than $1,000 daily volume.
  • 26 of the exchanges had 50% or more trading pairs with less than $10,000 daily volume.
  • 26 of the exchanges had 20% or less trading pairs with less than $1,000 daily volume.
  • 10 of the exchanges had 20% or less trading pairs with less than $10,000 daily volume.
  • Liquid and YoBit were the two exchanges with 80% or more of all trading pairs having less than $1,000 daily volume.
  • Binance and TOKOK were the only exchanges that had no trading pairs with less than $1,000 daily volume.

In-depth breakdown

As mentioned, the research included 64 of the top 100 exchanges as per the data for adjusted volume by CoinMarketCap. We omitted 36 exchanges which had little to no altcoins trading on them as the focus was on finding some pointer towards the feasibility of exchange listings for alternative digital assets.

If you have ever been a part of a Telegram group of an ICO project, then you know that at some point, the community initiates a never-ending quest for centralized exchange listings. While an exchange listing is certainly imperative for the success of every cryptocurrency, it by no means is the defining factor for the success of the enterprise as a whole.

As we will see from this tiny research, a large part of exchange listings become practically useless not long after the hype behind the digital asset dissipates. At the same time, the exchanges themselves are charging outrageous fees for something that is essentially a week-long marketing campaign.

For instance, KuCoin, currently sitting around the top 50 of exchanges on CMC, charges 40 BTC for a listing. Presently, that is around $200,000 USD. And from our research, more than 64% of KuCoin trading pairs have less than $10,000 daily volume.

Here’s some data from our research before we proceed with the breakdown. First of all, we display the number of exchanges where certain percentages of the total trading pairs have less than $1,000 daily volume:

Next, we display the same but for trading pairs with less than $10,000 daily volume:

While not conclusive, this data clearly insinuates just how many digital assets sit around in a metaphorical standby. The numbers for the cryptocurrencies with close to zero volume would have been even higher if it wasn’t for the regular de-listings that exchanges perform.

For example, KuCoin de-lists projects on a monthly basis, usually in the range of 5 – 10. Imagine paying $200,000 for a listing and then having your cryptocurrency removed due to low liquidity. But that’s a story for another day and it is not entirely the exchanges’ fault.

As per info from ICObench, here are some more examples of current exchange listing prices:

  • ABCC – 12 BTC
  • Bitinka – 8 BTC
  • Coinall (OKEX) – 15 BTC
  • IDAX – 20 BTC
  • DigiFinex – 30 BTC
  • Lbank – 30 BTC
  • BitForex – 30 BTC
  • HitBTC – 40 BTC

While some of these exchanges have decently low numbers of trading pairs that can be considered stagnant, Bitinka being one example with only about 13% of all trading pairs having less than $1,000 daily volume, the fees are still obscene considering what you are getting.

HitBTC, the 4th ranked exchange by volume, had more than 50% of all trading pairs with less than $1,000 daily volume and more than 70% of all trading pairs with less than $10,000 daily volume. For an exchange ranking that high, this is certainly not a good indicator.

Exchanges are not fully responsible

While exchanges are certainly pouring gasoline in the speculation bonfire, they are not fully responsible for the current blockchain landscape. They may be perceived as simply going with the flow, although not a good excuse.

The listings screening process should not be primarily based on how much a project raised, who the team is, how much volume per day the digital asset has but rather, primarily based on product development progress. This is a core issue and is the reason why so many cryptocurrencies become dormant not long after their exchange listing.

There is no stability in speculation and as soon as the new hype arrives, people forget about old projects. Basing listings on development progress however, will root much more stability in digital asset prices. Sadly, exchanges can’t really solve this problem. If they began listing only projects with development progress to show, there won’t be almost anyone to list and they have to make money to keep their businesses going.

If this backwards scenery is to turn around, a radical change in blockchain startups culture will have to emerge, exchanges included. An ethical exchange, listing only projects that have working products, doesn’t stand a chance at the moment. It will drown in the sea of decomposed digital asset trading platforms, looking to list anything so long they make money on listing and transaction fees.

Exchanges such as Binance and Huobi seem to be steadily leading the way towards a better future, although we are still far away from what the scene should look like. Reality is, the setting we have created so far is still dominated by a never-ending pursuit of quick turnovers and exchanges need to become less greedy and more focused on helping the industry mature if the current blockchain landscape is to ever change.