Measuring the effect of digital token listings on one of the largest & most well-known crypto exchanges
This well-known phenomenon in the Cryptoverse explores and measures the positive effects on digital asset prices when new listings are announced. For all the people who are not too familiar with the crypto space, let’s start off from scratch. Coinbase is the largest cryptocurrency exchange in the U.S and is considered by many as the largest retail onramp to crypto. And the boom of the past 12 months has lifted its fortunes even further. So much so that the crypto exchange plans to go public on April 14, with the ticker ‘COIN’.
The premise behind the ‘Coinbase effect’ goes something like this — When a cryptocurrency is listed on a popular exchange it immediately gains exposure to a new set of market participants & gains in value. The effect has been thoroughly investigated before, using Coinbase as the main exchange. However, this research from Messari extends the work done previously to include five more crypto exchanges to see how the kind of effect produced by similar listing on other platforms.
Data for the listing information was gathered using Messari’s intelligence database from six different centralized cryptocurrency exchanges:
❶ Coinbase — 28 token listings
❷ Binance — 22 token listings
❸ FTX — 19 token listings
❹ Gemini — 19 token listings
❺ Kraken — 11 token listings
❻ OKEx — 14 token listings
The research looked at the distribution of cumulative returns five days after the token listing as a rough estimate, to capture the effect. As was expected, Coinbase listings produced the highest average return standing at 91%, but also have the widest distribution ranging from -32% to 645%.
As evident from the numbers above, Coinbase listings lead to higher returns when compared to other exchanges (Figure 1, left). However, the Coinbase dataset contained some outliers — six listings that produced outsized gains have been highlighted in the second chart to the right (above). These included the following:
- District0x — (645%)
- Civic — (492%)
- Band protocol — (234%)
- The Graph — (169%)
- Numeraire — (167%)
- Skale network — (135%)
Weeding out the effect of these outliers presents a more accurate picture of the listing gains associated with the exchanges mentioned above. Even after taking the outliers out of the equation, it is evident that the Coinbase listing has the highest impact on price among exchange listings with an average five-day return of 29% (Figure 2).
The numbers tabulated as such, suggest that exchange listings, especially Coinbase, more often than not lead to a boost in asset returns. However, one other important factor that needs to be taken into consideration in the tabulation of such results is the general market environment at the time of listing.
For now, the Coinbase effect has solidified its reputation as a benchmark in coin listings. As usual, please don’t consider this as any kind of investment advice and do your own due diligence and trade/invest according to your risk profile.
Originally Published on Medium