This year has seen the crypto market slump losing a substantial amount of its value. The crypto coins have been affected but they are not the only ones that have suffered. Exchanges are also feeling the heat and crypto exchanges are resulting to controversial practices to boost trading activity and win the market share.
Crypto exchanges like OKex, FCoin, and Bitfinex are asking startups that have coins they need listed to drive depositors to the trading platform. Others like KuCoin and Binance are accepting listing fees that differ by the project. Other exchanges are introducing their own native coins which traders can use to vote on potential listings.
These new tactics are coming as result of exchanges feeling the pressure from declining trading volumes. The trading volume has so far lost about 80% from its January peak. Also, the rise of new cheaper coins that are seen as cheaper and easier to use promises to erode fee revenue further.
Speaking to Bloomberg via email, Lucas Nuzzi, the director of technology at Digital Asset Research said:
“The market downturn has certainly contributed to an increase in unorthodox strategies by token issuers and exchanges.”
Listing coins have contributed about $1 billion in exchanges revenue according to Lex Sokolin of Autonomous research. This clearly indicates how rewarding listing fees are to exchanges.
Michael Jackson, a partner at Mangrove Capital Partners says that listing fees in some Asian exchanges can reach up to $1 million.
Recently, Christopher Franco, the co-founder of Expanse, a blockchain backed startup got to experience how crypto exchanges go about their business.
He contacted KuCoin on the potential of getting Expanse tokens listed on the exchange and they quoted him 50 Bitcoins. This translates to $315,000 at current prices.
Franco says they chose to forgo the listing. Because even if they could afford it, it didn’t justify the means.
Others like Binance have mentioned having a preference for startups that help them by incorporating the BNB token into their ecosystem.
Even though some of these practices may seem unfair, Emin Gun Sirer says exchanges asking for depositors is justified.
“That’s a perfectly reasonable practice. There are too many coins, most of them of questionable value and the exchanges are in a position to pick and choose. It’s not surprising that they would make demands for the coins to bring in something tangible to the exchange.”
Sirer is the Co-director of Initiative for Cryptocurrencies and Smart Contracts at Cornell University.
What do you think of crypto exchanges using unorthodox ways to boost their revenue? Share your thoughts in the comment section below.