With the collapse in the volume of digital currency trading, some of the largest cryptographic exchanges are turning to unorthodox practices to increase activity and gain market share.
Bitfinex, FCoin and OKex are encouraging start-ups to guide depositors to their online trading platforms to get listed coins. Other exchanges, such as Binance and KuCoin, are adopting quotation rates that may differ by project. Many exchanges are also pulling out their "native currencies", which traders use to vote on potential lists.
The practices are in contrast with those of traditional exchanges, which apply lower tariffs and do not require issuers to direct commercial traffic to the exchange. Other grants do not question the existing users on which the securities enter the market.
The unusual embrace comes when cryptographic exchanges feel the pain that is swept away by the digital currencies market after the coin prices have plummeted by 50% on average. Trading volume has plummeted 80% from its January peak, according to CoinMarketCap.com. And new types of currencies and exchanges, which are billed as less expensive and easier to use, threaten to feed profits more thoroughly.
"The market crisis has certainly helped to increase unorthodox strategies from issuers and token exchanges", Lucas Nuzzi, director of technological research at Digital Asset Research, stated in an email.
For coin issuers wishing to gain exposure to investors, practices can be confusing. Christopher Franco, co-founder of Washington, North Carolina startup blockchain, Expanse, said that KuCoin has listed an entry fee of 50 Bitcoin – about $ 315,000 at current prices. The expanse has not been published with a list.
"We can pay for this, but it does not justify the means," Franco said in a telephone interview. Many startups prefer to invest these sums in research, development and marketing.
KuCoin spokesman challenged the 50 Bitcoin registration fee and said that listing prices will vary by start. The exchange does not reveal them. "The quote is not the key factor to list a project, the project itself is," said spokesman Miles Wu.
Crytpo's exchange rates may be difficult to determine in advance and two startups of the same size that apply to the same exchange may be charged different rates. In contrast, Nasdaq Inc. charges $ 50,000 to list a company with up to 15 million shares and $ 225,000 to list a company with over 100 million shares.
The motivation behind the unusual moves is clear enough. Taxes have contributed about $ 1 billion to trade revenue to date, according to Autonomous Research's Lex Sokolin. The listing prices on some Asian exchanges have reached up to $ 1 million, according to Michael Jackson, partner of Mangrove Capital Partners.
But these practices raise red flags for industry watchers, especially if many cryptographic exchanges function as marketplaces, brokers, custodians and even asset holders – roles generally divided into the traditional financial market structure
That "leads to risk intrinsic to conflict of interests "according to the Asia Securities Industry & Financial Markets Association. Its recommendations on best practices suggest that all applicants be charged a flat rate "to avoid giving the impression that exchange listing decisions are determined or influenced by the amount of money an issuer is willing to pay".
The second largest exchange, OKex, says on its website that a candidate who brings 50,000 new registered users, with 20,000 of them active with at least one Ether coin in their account, will take a better shot into consideration.
"We are still receiving a lot of applications," said Jesper Cheng, an OKex spokesperson in an e-mail. He said that companies looking for a list of coins still have to comply with the quotation standards and that the mere delivery of new users is not enough. The exchange does not charge a commission. Another exchange, FCoin, tells users to deposit their coins to earn a list.
Bitfinex is causing users to exchange more on their Ethfinex exchange by assigning tokens in proportion to their account activity. These so-called native tokens can then be used to vote for new listings.
Kasper Rasmussen, who directs corporate communications, said that the practice gives the most loyal traders of the exchange a point on the listed coins. In the last six months, Bitfinex has tripled its 270 token cards in an attempt to offset the trade volume downturns.
"We are receiving a lot of support from new projects," said Rasmussen. "We are exploring different ways in which the ecosystem could evolve."
The largest exchange by trade volume, Binance, says that startups that incorporate their own currency into their ecosystem have a better chance of being listed. The exchange, which lists 380 coins, does not have a standard tariff but invites start-ups to bid, the company said in a blog post.
"All of these things will surely increase your review priority and chances of listing" Binance CEO Changpeng Zhao wrote. "Let us remember the people who help us"
Guide depositors in exchanges can be justified.
"It's a perfectly reasonable practice", Emin Gun Sirer, co-director of the Cryptocurrency Initiative and Intelligent Contracts at Cornell University, said in an e-mail. "There are too many coins, most of them of questionable value, and exchanges are able to choose and choose." It is not surprising that they ask for coins to bring something tangible to the exchange. "
Gil Luria, director of Institutional stock research at Davidson & Co., said investors should be cautious about investing in native tokens.
"The goal of an encrypted exchange is to act as a crypt in the currency of the government, or between different cryptographic resources," he said. "The addition of an exchange layer token could add an unnecessary step, which should raise concerns for investors."