In a little over a year, Binance grew from an unknown startup to the largest cryptocurrency exchange in the world. The exchange has 10 million registered users and is on track to generate between $500M-$1B in profit in 2018.
While a listing on Coinbase comes with the prestige and support of a well-regulated exchange, Binance is the proverbial golden goose for the majority of crypto projects. With its $1B+ in trading volume, global reach, and relatively lax listing requirements, Binance is the exchange of choice for projects that want to get their cryptoassets listed for trading.
In the crypto ecosystem, exchange listings come with the same flair and style of traditional IPOs. The news coverage, the investor enthusiasm, and — most importantly — the price boost. Whenever an exchange announces the listing of a cryptoasset, media outlets plaster their headlines with “Asset A rallying/pumping/rising/surging B percentages after listing on exchange B.”
Crypto exchanges have capitalized on this hype cycle, charging crypto projects enormous listing fees for the privilege of being listed on their exchange and gaining access to the liquidity those exchanges provide. Binance is no different. While the company has been opaque on its listing fees, there have been multiple reports that Binance listing fees get as high as $2.6M. Yet, it appears that many projects are still willing to accept these fees to get listed on Binance.
As Binance begins its process of listing transparency — enabling teams to dictate their listings fee — we at The Block decided to take a look at just how much projects can benefit from a Binance listing and what happens when Binance decides to delist your asset.
The Binance Bump
As of the time of this writing, Binance has 165 assets listed on its platform. To measure the “Binance Bump,” The Block has removed 42 assets from this analysis. There are three main factors for an asset’s removal (1) Missing data points for our analysis (2) Assets were listed at the launch of Binance so the bump can’t be measured and (3) Stablecoins whose value, in theory, should not change.
All said and done we are left with 123 cryptoassets to measure the Binance Bump. Next, we separated the Binance Bump into four timeframes: (1) Returns from pre-announcement “closing” price to price highs (2) 24-hour returns (3) 7-day returns and (4) 30-day returns.
Returns from pre-announcement ‘closing’ price to price highs
Let’s start with returns from the pre-announcement “closing” price to price highs. As we know, cryptoassets are traded 24 hours a day and do not have a natural closing time. However, we believe that using this “closing” price as anchor will help us better measure the returns of an asset before and after a Binance listing announcement. As such, we used the “closing” price listed on CoinMarketCap, which by their definition is “Latest data in range (UTC time).”
With a closing price at hand, we input the announcement dates of an asset from Binance’s New Listings page. We specifically choose the date of announcement as opposed to the date of actual listing, because we believe that the announcement itself would contribute the most to a price increase for an asset. Here is what we found: From the closing price a day prior to a listing announcement to the highest price on the day of a listing announcement, cryptoassets receive on average a 51% return for a Binance listing. However, averages are a deceiving metric, so we took a look at the median. The median return for an asset from close to high is 29%. To put it in dollar terms, if you invested a dollar in an asset at its closing price prior to a Binance announcement and sold the asset at its highest price after the announcement you would have an average return of $1.51 and a median return of $1.29.
For 24-hour returns, we compared the closing price of an asset a day prior to the listing announcement to the closing price on the day of a listing announcement. Using these two data points, we found that the average returns of Binance Bump in a 24-hour period was 27% while the median return was 12%. In dollar terms, if you invested a dollar in an asset at its closing price prior to a Binance announcement and sold the asset at its closing price on the day of the announcement, you would have an average return of $1.27 and a median return of $1.12.
For the 7-day returns, we compared the closing price of an asset on the day of a listing announcement to the closing price of an asset the week after the listing announcement. Using these two data points, we found that the average returns of Binance Bump in a 7-day period was 2% while the median return was -11%. In dollar terms, if you invested a dollar in an asset at its closing price prior to a Binance announcement and sold the asset at its closing price seven days after the announcement, you would have an average return of $1.02 and a median return of $0.89.
For the 30-day returns, we compared the closing price of an asset on the day of a listing announcement to the closing price of an asset 30 days after the listing announcement. Using these two data points, we found that the average returns of Binance Bump in a 30-day period was 37% while the median return was -15%. In dollar terms, if you invested a dollar in an asset at its closing price prior to a Binance announcement and sold the asset at its closing price on the 30th day after the announcement, you would have an average return of $1.37 and a median return of $0.85. For the 30-day returns, we can see the effects of outliers more clearly, as assets like EthLend, with a ~977% return, greatly influenced the average returns of the data set.
The Binance Dump
If a Binance listing appears to positively impact the price of a cryptoasset, it would be logical to assume that a Binance delisting would do that opposite. The Binance Dump, however, is harder to measure. From our research, we found that Binance has only delisted or has announced the delisting of 10 assets. Because of this small sample size, it is difficult to draw a strong conclusion. However, for the sake of curiosity, we ran the numbers on the results of a Binance delisting.
By comparing the closing price of an asset prior to a delisting announcement and the price lows on the day of a delisting announcement we found that assets gave an average return of -22.80% and a median return of -11.77%. As we mentioned, this data set is too small to provide an accurate conclusion, but it appears that a Binance delisting has a significant impact on the price of an asset.
Looking at the results
While a Binance listing appears to impact an asset positively, the impact is short-lived. The 24-hour period between from prior to an asset listing announcement to the day of the announcement, there is a median return of 12%. However, within a week, the effects of the Binance Bump begin to wither, producing a median return of -11% from the Day 1 close to the Day 7 close . As time passes the median returns become even worse, producing a median return of -15% from the Day 1 close to the Day 31 close after a listing announcement.
While assets do benefit from increased liquidity, the Binance Bump appears to be less impactful on the price of an asset over a longer period. We do note, however, that this analysis is only looking at the daily, weekly, and monthly returns. Given enough time, a Binance listing could produce a higher return, though based on our data that seems unlikely. As is typical with The Block’s research, we encourage our readers to play around with our data to draw their own conclusions.
Our data can be found here
Data on the Binance Dump contributed by The Block’s Larry Cermak
The post Measuring the Binance bump (and dump) appeared first on The Block.
Measuring the Binance bump (and dump) written by Steven Zheng @ https://theblockcrypto.com/2018/10/18/measuring-the-binance-bump-and-dump/ October 18, 2018 Steven Zheng