“When Binance?” is the refrain from impatient bag-holders in ICO Telegram groups. For investors eager to flip their tokens and move onto the next thing, a major exchange listing is the big event, and the sooner the better. But for beleaguered project teams, with a community to manage, workforce to recruit, and decentralized solution to build, an exchange listing is the least of their concerns. It’s also the most expensive.
Creating a Token is Easy. Listing it is Hard
With the number of global cryptocurrency exchanges now in excess of 250, there ought to be more than enough platforms to support new ICO tokens. But as many of these projects are finding out, obtaining an exchange listing without paying exorbitant fees is almost impossible. ICOs unwilling to stump up risk being left to languish in the shadowlands of low liquidity DEXes. Recent research from ICOrating.com shows the difficulties projects face in getting their token listed on a reputable exchange – and those problems aren’t limited to affording the listing fee.
For one thing, the project needs to have completed a successful ICO in the first place. If their tokens failed to sell out, even with the remainder being burned, demand for the token on the secondary markets will be low and exchanges are unlikely to be interested. ICOrating reports that only 22% of ICOs that completed in Q1 of 2018 were able to have their token listed. This figure is down 10% on the previous quarter, which is attributed to the fact that half of all ICOs in Q1 of 2018 raised less than $100,000.
Listing Fees Vary Greatly
Projects that failed to hit their hard cap simply can’t afford an exchange listing, while those that did may still balk at the price. The discrepancy between what exchanges charge is huge, ranging from around $100,000 to $3 million for the largest and most liquid exchanges.
It has been claimed that Binance charges as much as $7 million in some cases. In fairness to cryptocurrency exchanges, listing a new token isn’t as simple as many traders seem to think.
Among the many tasks that must be performed before a token can be listed is the necessary due diligence to ensure the project is not a scam. Should a token later be discovered to be one, it risks affecting the platform’s reputation, as happened when Centra was revealed to be a fraud, prompting Kucoin and Binance to hastily delist it. Due to the time required to perform various security checks and other administrative tasks, it takes an average of 21 days for an ICO’s token to start trading, ICOrating reports.
Some exchanges also insist that the token’s smart contract is audited to check for bugs, which is understandable given their prevalence and potential severity.
Exchanges Can’t Always Be Relied On
Even after securing an exchange listing, it is not always plain sailing for ICOs. There have been instances of exchanges delisting tokens without warning. Regulatory pressure can also take its toll: if there are rumors that a certain token risks being labeled a security, exchanges can get spooked and delist it to be safe. Given the haste with which newly listed tokens can be pumped, dumped, and then left to die a lingering death, with the project still months away from launch, it’s no wonder that some ICOs are hesitant to have their token listed before their beta is ready and there’s genuine demand for their token.
For each problem an exchange listing solves, it introduces several more. Be it through choice or necessity, 70% of 2018 ICO tokens have yet to make an exchange. Most of them never will.