In the letter
- The Coinbase effect pushed district0x’s price by nearly 800% after a listing last week.
- The token was one of the largest ICOs in 2017, but saw both popularity and use decline in the following months.
- Meanwhile, the data shows that such pumps are temporary.
A Coinbase listing revived the price of an altcoin from its slumber. The major US exchange listed the district0x (DNT) governance token in a surprise ad on November 6, pushing its price up within hours at the time, by 797% on Tuesday.
DNT went from $ 0.0088 a day before listing to over $ 0.079 yesterday. Traders have since taken profits and cut prices to $ 0.062 (still a nearly 600% increase for those who haven’t sold yet).
Altcoin was one of the most publicized cryptocurrencies in 2017, with its ability to allow users to create decentralized markets (or districts). This caused its prices to rise to an all-time high of $ 0.50 in January 2018. A fantasy environment was an important part of district0x’s premise: its token was required for application to the “District Registry” and used to report support or disapproval of proposals made by other participants in the network.
But the multi-year bear market has swept these stories away. The DNT token swooped down with few users of the platform and no use for its tokens. The price dropped to just $ 0.002 in May of this year, before seeing a brief comeback as the decentralized finance (DeFi) sector began to become a leading narrative in the cryptocurrency industry.
Last week’s Coinbase listing really revived its price. The phenomenon, known colloquially in cryptographic circles as “Coinbase effect, “You see that altcoins often have a immediate value of the pump every time news of their listing on the San Francisco stock exchange is released. This is in part due to the stock exchange’s strict regulatory and compliance policies set by the US government, with a list showing a stamp of approval (at least on paper).
District0x was joined by Civic (CVC) and Decentraland (MANA) – also two altcoins that fell from the 2017 hype with the token of the former used to power digital identity and the latter used to power a so-called “virtual reality platform” market – on Coinbase’s list last week . They got the Coinbase treatment the same way.
While CVC reached a high of $ 0.173 from $ 0.025 pre-listing (a 592% increase), MANA only offered investors a small 60% of the pump from the listing date to today, from $ 0.06 to a high of $ 0.113 on Tuesday.
The pump is unlikely to last either. Research from on-chain metrics company Coin Metrics earlier this year suggested that the Coinbase effect wanes over a 100-day period, with most gains in the first ten days then stabilizing to reflect a “trend in the broader” crypto market.
Expect cryptocurrency traders to chase after Coinbase’s next pump by then.