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04 September 2020

An Inside Look at US Crypto Exchange Listings

With the markets running hot, crypto exchange listings have seemingly become a catalyst for price movements. It’s almost 2017 all over again.

The trend is readily apparent when looking at Coinbase’s most recent additions. Nearly every new listing has seen a substantial boost in price on the day Coinbase announced it was opening its digital doors and turning on the frothy faucets of sweet liquidity. NMR tripled and COMP doubled on their announcement days. Even ALGO’s intraday increase of 21% was nothing to sneeze at.

The lone exception was Coinbase’s most recent addition, UMA, as it fell alongside the rest of the market over the last few days. Onlookers should also note that UMA was up 230% in the week leading up to its announcement, which may have been a byproduct of its coincidental involvement in SushiSwap.

The real beneficiary Token projects aren’t the only ones that benefit from these listings. The exchanges often see a boost in trading volume (where they make their money) and user accounts. New coins open the doors to new crypto tribes communities that otherwise can’t see the world outside of their bags. Exchanges can also boost their own portfolios and offer themselves an avenue to liquidity should they have a crypto-focused venture arm. Coinbase, in particular, has taken advantage of its proximity to specific projects. Four of the last six Coinbase listings have been in Coinbase Venture’s portfolio.

Coinbase isn’t the only exchange that has capitalized on this DeFi-inspired market. The other major US exchanges, Kraken and Binance.US, have picked up their rate of new listings, adding six and twelve new assets since June, respectively. Even Gemini, the most conservative of the bunch, has increased its offerings by 75% this year. All are on pace to best their total listings from 2019.

This trend will likely continue, especially if the market doesn’t cool down anytime soon, and assets on the waiting list could present an enticing investment opportunity. While investors can’t know what asset a crypto exchange will list next (ignoring insider trading), there are some signals amidst the noise.

Fortunately, fellow Messari analyst Mason has already analyzed how to wade through the crypto content swamp to pinpoint potential opportunities. He also compiled the liquid portfolios for these exchanges (where applicable) and their listing considerations: - Coinbase Ventures portfolio - Coinbase listing considerations - Coinbase Custody supported assets - Binance Labs portfolio - Gemini Custody supported assets

One should also monitor the assets in exchange portfolios that aren’t trading yet under the assumption exchanges will support them soon after launch. It took Coinbase only a few months to list COMP and CELO after these tokens became transferable. Coinbase Ventures’ illiquid assets that are closing in on a mainnet or token launch include Near Protocol (in pretend mainnet), Coda (mainnet launch due at the end of 2020), The Graph, BloXroute, and Spacemesh (mainnet launch expected in 2021).

Deja vu? In some ways, this year’s “Exchange Pump Phenomenon” resembles that of 2017. Like the last bull run, international exchanges have beaten US-based exchanges to the punch by mass listing DeFi tokens. Legal ramifications aside, US exchanges are missing out on a potential opportunity by not supporting tokens like YFI that boast a highly dedicated community.

Generating early liquidity is critical as it can often determine whether an exchange becomes the preferred destination for traders. Listings have the potential to bring this liquidity. But waiting to act can jeopardize one’s future market share. In the case of YFI, Binance has risen to the pole position and now holds nearly 15% of the total YFI supply. Since roughly 70% of YFI supply is actively staking, the limited amount remaining might make Binance difficult to unseat.

Source: Nansen

Despite the mild similarities to 2017, this time around is decidedly different. Crypto exchanges are no longer competing amongst themselves. The rise of Uniswap and similar protocols have made decentralized exchanges (DEXs) an actual threat to current dominance shared by centralized exchanges (CEXs). CEXs were previously the primary destination for crypto users. They’ve now increasingly become a simple on-ramp for DeFi applications. More efficient crypto gateways could further disrupt their already dwindling dominance.

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