Bitcoin will not work: how much does listing on crypto exchanges cost?

Before cryptocurrencies and tokens become available for trading, they must go through a lengthy analysis process. Only after several stages of selection will they be able to get on the exchanges, which are the main tool for trading digital assets. On a cryptocurrency exchange, as on a stock exchange, this process is called listing. With the addition of cryptocurrencies to trading platforms, their development trends change significantly.

What is listing of cryptocurrencies and tokens

Listing (from the English list - list) is the procedure for adding digital coins to the lists of available instruments on trading platforms. Once added to the lists, assets become available for sale and purchase and are included in quotes.

The cryptocurrency market is actively developing and thousands of new coins are issued every year. The high level of competition poses a more acute question for the creators about popularizing their coin. Listing on exchanges is one of the main factors in the recognition of cryptocurrencies. There is also a certain connection between the success of an asset and the number of trading platforms on which it is added.

What is a listing

Listing is the admission of a company's securities to trading on an exchange. A securities listing becomes necessary when a public limited company plans to issue shares or debentures to the public. In order for assets to be listed on a particular exchange, a company must fulfill a number of requirements, some of which are common to all trading platforms, and some of which relate to individual conditions.

Listing provides an exclusive privilege for securities - the stock exchange ensures transparency in securities transactions, as well as equality and competitive conditions. Listing is beneficial both for companies and for investors and for the general public as well.

Listing new cryptocurrencies is an equally important process. Every ICO will end sooner or later, but this should not lead to a drop in the number of people interested in this project. This is where exchanges come to the rescue, allowing companies to continue popularizing their cryptocurrency after the official completion of the ICO. Placing a token on an exchange can increase its value by 15–20%. For this reason, placing a cryptocurrency is one of the most important tasks for a company after an Initial Coin Offering.

How does listing on the stock exchange take place?

The initiators of the listing are, as a rule, the creators of the coin. It happens that trading platforms can take the initiative and add an asset if the coin is already in demand among traders.

How to add cryptocurrency to the exchange? Methods may vary depending on the chosen site and its popularity. Each trading platform sets its own rules and requirements for adding an asset. Some exchanges set quite high standards, others are more loyal to new cryptocurrencies.

To be added to the exchange, an issuer needs to go through several steps:

• Fill out a form where you need to indicate basic information about the project: date of creation: page on Github; White paper; possibility of mining, emission, etc.
• Based on the data received, the trading platform will analyze the profitability and liquidity of the asset.
• Based on the results of the analysis, a special commission will decide whether to add cryptocurrency to the list.
• If the decision is positive, the issuer and the trading platform enter into an agreement.

The main thing that cryptocurrency exchanges pay attention to is the utility, functionality and value of the coin. The next most important criterion is security, since if the cryptocurrency network is hacked, the exchange will also suffer. They also pay attention to the reputation and professionalism of the developers.

Sometimes sites hold competitions and surveys among traders. Bidders are encouraged to vote for prelisted coins. The winning cryptocurrency will be added to the list.

Token support costs

Listing costs vary depending on the type of coin. For example, maintaining an Ethereum node is very expensive for exchanges compared to maintaining a Bitcoin node. In addition, hard forks become a big problem because they require maintenance and ongoing costs. In BCH and XMR, had forks took place every 6 months, in the Ethereum network several times a year. Without updates, the exchange will not be able to verify transactions, and downtime is bad for its reputation.

Bitcoin, on the other hand, has avoided hard forks throughout its long history.

Thus, maintaining highly liquid Bitcoin is quite cheap, while maintaining Ethereum and other less liquid altcoins is very expensive. Ultimately, the complexity of system updates determines the cost of the coin and at a certain point it may simply not be economically viable or even impossible to continue support (as is the case with BSV on BitGo).

If the revenues outweigh the costs of maintaining the altcoin, then the profitability of the listing seems obvious, but this is a short-sighted opinion. There are a number of threats associated with listing a token that must also be taken into account - the risk of hacking, the risk of blockchain reorganization, and regulatory risks.

Crypto exchange hacks no longer surprise anyone today, and losses are usually significant. The hack can be internal (employee or owner) or external. Listing a new coin adds an attack vector to any exchange.

The most famous example is the story of Cryptsy, which was allegedly hacked in 2014 by adding a coin whose node contained malware. The coin's creators apparently used full node software to access Cryptsy's systems and were able to steal 13,000 BTC and 30,000 LTC as a result.

Auditing the code security of each token is necessary to mitigate this risk, but given how much code needs to be reviewed, this is not a very common practice. In addition, any software updates must also undergo separate testing. Frequent forced updates or hard forks make security even more expensive.

Another risk is the possibility of blockchain reorganization. The coin can be attacked directly, and attackers can use the exchange as a victim. For example, someone can deposit a large amount of PoW cryptocurrency with a low hashrate on the exchange, exchange it for something more liquid and withdraw it. The cryptocurrency can then be attacked and reorganized to reverse the deposit transaction. Obviously, the exchange would lose a lot of money on this.

Finally, there are certain regulatory risks. For example, AML/KYC requirements may make it difficult to list a coin with an increased level of anonymity. The coin can also be recognized as a security. These risks include not only laws that exist today, but also laws that may be enacted in the future.

What is the listing cost

Listing is generally a paid procedure, but there are exceptions. The cost of listing a coin and the entry bar mainly depends on the popularity of the trading platform. Small trading platforms most often include new promising cryptocurrencies in their lists for free, while large platforms require money for analysis, and the amounts can be tens or even hundreds of thousands of dollars.

Everything is purely individual. For example, the well-known exchange Poloniex states in its manual that coins are added to the list for free. Binance charges a fee, but uses it for charity and funding new projects.

According to investigative journalism from Business Insider, the minimum cost to add digital assets to an exchange is approximately $50,000, and can reach into the millions.

There have also been cases when the exchange administration was caught taking bribes. In particular, the management of the Coinnest exchange took $890 thousand for adding the S-coin cryptocurrency to the listing.

Listing on Binance DEX

Binance has added another service under its brand - Binance DEX, a decentralized exchange. This exchanger, however, has a different policy regarding listing fees. Binance CEO Changpeng Zhao said in a livestream in January that listing fees on the exchange would be around $100,000. This barrier to entry is intended to "reduce spam or fraudulent projects." In addition to the listing fee, there is also a voting process where the community is said to have a say on new listings on the DEX.

Why does the price of a cryptocurrency increase after being added to the exchange?

The main criterion for the value of any currency is its prevalence. If fiat money has at least an imaginary backing in gold and a link to the economy, then for cryptocurrencies popularity is the only decisive factor. The more people use an asset, the greater its value will be.

The information that any new cryptocurrency will be added to the top platform already significantly fuels interest in it. During such a PR campaign, a huge number of traders learn about cryptocurrency, and the very addition of a token is a signal to buy.

An increase in demand for an asset inevitably leads to an increase in its value. On average, after adding, the value of the cryptocurrency increases by 25-30%. This is the so-called “exchange effect”, which is achieved through popularization. It should be noted that the effect is often short-term and after the hype, the value of the coin begins to gradually decrease.

Sometimes the opposite situation is observed when, immediately after being listed, the value of coins begins to decline sharply. As a rule, this applies to coins launched as part of an ICO. Investors who invested during the token sale seek to lock in profits and actively sell the asset on exchanges.

How can an investor make money from this?

Experienced investors have learned to make money on any events in the cryptocurrency market, and listing is no exception. The earning scheme is quite simple:

• the news report is monitored for the presence of suitable news leads;
• Having found information about an upcoming addition, the investor buys the asset before it hits the exchange;
• after being added to the exchange list, the coins are “merged”.

The most important thing is to choose the right exit point from the market. As a rule, a coin has increased interest and, accordingly, the value is held for several days or a week, and then gradually decreases. Beginning investors are advised to sell coins without delay, and having experience in monitoring price corrections, you can wait for the highest price.

Despite its simplicity, the method is also associated with several risks:

• The news may turn out to be fake. In such circumstances, the investor will go into the red. To prevent this, it is recommended to use only verified news sources, such as the official pages of exchanges and developers. Each news feed must be checked.
• Wrong choice of digital asset. As stated earlier, listing does not always have a positive effect on the value of the coin. The increase may also not be as sharp as expected. It is recommended to pay attention to not the top, but promising coins.
• Wrong choice of exchange. The profitability of such investments directly depends on their popularity. Adding to small services may not cause a significant resonance, but getting into the exchange list of large services is almost always a stir.

Advantages and Disadvantages of Listing

It’s not without reason that developers put so much effort into getting listed on stock exchanges. Adding a token to a listing has a number of benefits for the developer:

• increasing investment attractiveness;
• facilitating further development of the project;
• increasing trust in the asset and developers;
• increase in capitalization;
• community expansion;
• increasing the sphere of influence.

For investors, being added to the listing is a guarantee and an opportunity to earn money. The reliability of such coins has been verified by experts. An increase in liquidity is also a significant advantage for investors. Those who invested in the asset during the token sale can now be confident that they will be able to sell coins and take profits.

Disadvantages of adding to the listing include a complex procedure and the need to pay an analysis fee. In addition, after entering the exchanges, cryptocurrencies attract special attention and from that moment on, any change in the project’s policy will immediately affect the value of the coins.

How to go through the listing procedure on the stock exchange?

Today there are two approaches to listing:

• The project independently selects a trading platform and offers to cooperate;
• Trading platform analysts find a cryptocurrency with great potential and offers to host it;

Due to the abundance of cryptocurrencies on the market, listing initiators are projects. And to increase the chances of success, projects should follow these steps:

• Study in detail all the features of listing on the exchange you are interested in.
• Prepare a package of documents that will greatly simplify the fundamental analysis of the company. If a project conducts transparent activities that are regulated by government laws, then it automatically increases the confidence of the exchange.
• Prepare a detailed press kit about your product. The project needs to prove that its product will be in demand in the market.
• Since the exchange is interested in getting as much profit as possible from trading operations, this means that the cryptocurrency must be in demand.
• Prepare design documents. If a press kit is a kind of information letter, then the design documents must convince the exchange that the asset is 100% safe. In particular, we are talking about the source code of the cryptocurrency, which must be freely available so that third-party competent blockchain developers can audit the code.

What is delisting

The inclusion of a new cryptocurrency in the list of trading assets on the exchange does not guarantee its permanent presence on it. On trading platforms, the reverse procedure is provided - delisting. This can be initiated by both the service itself and the developers, if the project is stopped. Typically, delisting occurs in one of the following cases:

• the coin no longer complies with the rules of the trading platform;
• over a long period of time, the value of cryptocurrency has not increased;
• the cryptocurrency blockchain was hacked;
• the developers are not promoting the project;
• changes in legislation;
• user complaints;
• the asset has low demand among traders.

Liquidity issue

The commercial success of the cryptocurrency market in 2020 has led to startups choosing to raise capital through initial coin offerings. Now this alternative is more accessible than an IPO. In addition, investors view such projects as a way to get rich quick. Those who invest expect to be able to easily speculate on their share. But to obtain liquidity, ICO organizers need to list tokens on at least one trading platform.

For some market participants, this is the only way to quickly increase their net worth. They need to be able to trade, and many startups practically promise them this from the very beginning of sales.

“If you are preparing for an ICO, you need to prepare for a listing. It is important to gain access to liquidity. This means that the larger the exchange, the more effort and cost it will take to get listed,” said Oliver Bussmann, a former UBS chief technology officer who now runs a Fintech consulting firm.

Naturally, the majority of respondents believe that a fee of $1 million just for inclusion in the list is clearly an excessive and unreasonable requirement. Even for startups that have raised multimillion-dollar investments, this is an excessive price to pay.

“This is due to the fact that there are many people willing to list their virtual currency. Trading platforms are places where liquidity and money are concentrated. That’s where the power is now,” said Michael Jackson, a partner at venture capital firm Mangrove Partners.

The developers believe that such conditions reflect the existing imbalance of power between exchange services and cryptocurrency projects in the market. The situation is aggravated by the fact that exchanges independently make decisions about which tokens to add. For some ICOs, this decision determines their future fate.

conclusions

Adding to the listing is a decisive moment in determining the further value of the cryptocurrency. If the developers managed to achieve the placement of the asset on major exchanges, then you can count on an increase in value and popularity. From this moment on, the cryptocurrency floats freely and its further value will be determined by supply and demand, and will also reflect all the actions of the developers. For investors, listing tokens means additional guarantees and an opportunity to earn money.

What is listing on a cryptocurrency exchange?

Listing is the procedure for adding a specific cryptocurrency to a trading platform. If an asset ceases to meet the “Terms of Agreement” of the exchange, then it carries out a so-called delisting.

A listing consists of three stages of offer, evaluation and addition. Let's look at each of them separately:

1. The stage of concluding cooperation between a crypto project and an exchange . If both parties have found a common language, have similar opinions and set the same goals, then the exchange moves on to the next stage - project evaluation.
2. The assessment phase involves analyzing the supply and demand for cryptocurrency . Liquidity, technological features, community size, availability of working products, etc. are assessed. The project is also assessed for compliance with the requirements of the legislation of that state. In general, the exchange conducts fundamental analysis. If everything is “okay” with the asset, the project is promising, and the development team is ambitious and wants to develop.
3. The adding stage speaks for itself . The project signs a partnership agreement with the exchange, which in turn adds the asset to the list of quoted cryptocurrencies.

If the project is caught with some kind of fraudulent activity or is simply unpromising, the exchange refuses listing.