The world’s largest stock markets such as the New York Stock Exchange (NYSE) and Nasdaq charge companies $225,000 to $300,000 for initial public offering (IPO) listings and a $70,000 annual fee. Cryptocurrency exchanges charge $500,000 to $1 million to list digital assets, which involve a process that is significantly simpler than listing stocks.
Exchanges are King
In the cryptocurrency market, initial coin offerings (ICOs) are considered a gold mine for entrepreneurs; with high liquidity and no limitation of investors in the public market, startups can raise millions to billions of dollars without limiting the sale of their tokens to accredited investors.
For a blockchain project to initiate a token sale and release the digital asset, offering a listing fee or an incentivization package is required. Often, trading platforms take a fee between $500,000 to $1 million, while others receive payments in the form of tokens.
In an interview with Business Insider, Michael Jackson, a partner at New York-based venture capital firm Mangrove Partners, revealed that he previously led an ICO project. When he tried to get his token listed, he was asked to pay listing fees in the range of $50,000 to $1 million, depending on the size and the liquidity of the exchange.
“At the lower end it’s $50,000, up to $1 million — I’ve heard that. It’s depending on the size of the exchange. I was doing a project, I won’t tell you specifically what one — one token on a number of exchanges — and that was the ballpark we were in.”
Based on the current structure of the cryptocurrency market, Jackson said exchanges have significant influence over the market and projects are desperate to launch their tokens to satisfy investors and experience large price gains. Jackson added:
“Basically there are a lot of people who want their coins listed. The exchanges are where the liquidity is — it’s where the money is — so that’s where the power is just at the moment. Investors are hoping to make money on it. They’ve got to be able to trade it and a lot of [ICOs] are almost promising their investors that, which is kind of dangerous.”
Problem With the Structure
The issue with the current structure of the cryptocurrency market, as Binance CEO Changpeng Zhao previously emphasized, is that both investors and blockchain projects are aiming for massive short-term gains, benefiting early investors and dumping the tokens on investors that enter the project on public exchanges.
Oliver Bussmann, the former CIO of UBS who currently operates an advisory firm, stated that most ICOs are willing to pay multi-million dollar fees to get listed on major exchanges such as Binance and Bithumb, which usually prompt two to five-fold increase in value for a token in the short-term.
“If you prepare for an ICO, you have to prepare for a listing. It’s important to get access to liquidity. That means the bigger the exchange is, the more effort and also more cost to get listed.”
Listing Proposal from a top 30 exchange,
openly asking our company to use trading bots to create fake volume with 0 transaction fees.
We offer what we see as a blockchain company wanting to do things. 😪
— Roy Huang (@_akahry_) June 18, 2018
Roy Huang, the co-founder of Fresco Network, the world’s first blockchain art asset network, recently disclosed that a top 30 cryptocurrency exchange offered Fresco to use bots to create fake volumes, to inflate the cryptocurrency.
The process of listing digital assets on exchanges may appear similar to the NYSE and Nasdaq – but investors are willing to pay substantially more than traditional stocks in anticipation of an immediate payout. Additionally, illegitimate tactics such as faking volumes via bot trading is at best, a disingenuous method of attracting new investor interest.
Cover Photo by Marc Sendra martorell on Unsplash