It has recently come to our attention that cryptocurrency exchanges charge anywhere between $500,000 to $1 million, as a fee to get their digit assets listed. This amount is almost two to four times the fees of what traditional markets, including the likes of the New York Stock Exchange (NYSE) and Nasdaq charge.
Michael Jackson, a partner at a VC called Mangrove Partners, recently spoke with Business Insider to share his experiences regarding the costs of getting digital assets listed on exchanges and how such fees are determined. According to his claims, his fees ranged from $50,000 to $1 million, which he believes liquidity and an exchange’s overall size establishes. In particular, he stated that,
“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.”
Clearly, Initial Coin Offerings (ICOs) is a strategy that many startups turn to, to raise funds. From 2017 until now, the number of ICOs have significantly gone up with many investors making double, if not even ten times compared to their investments. Because of such success stories, investors are immediately attracted to them as a mean of making a lot of money in the short term. Unfortunately, short term gains are what many consider a problem.
According to many crypto leaders, including CEO of Binance, Changpeng Zhao, how the crypto market works, along with the emphasis placed on short term gains is what’s problematic. Many view this tactic as a way that contributes to a bubble market – once there is a bubble, it will eventually pop! With more and more companies looking to increase liquidity and working towards getting their tokens listed, many investors will try to get into it earlier and exit when a decent profit has been made.
Oliver Bussman, former CIO of UBS has also shared his perspective on exchanges stating that,
“If you prepare for an ICO, you have to prepare for a listing. It’s important to get access to liquidity. […] the bigger the exchange is, the more effort and also more sot to get listed.”
To add to this, recently Roy Huang, Co-Founder of Fresco Network has shared that he was asked by an exchange, one he did not call out, but considered one of the top 30, to use his bots to create falsified volume. This is normally done to increase crypto exposure, while attracting investors, as it is one of the many factors that help one determine whether the project is sound enough to invest in. This poses another problem. Given one agrees to such falsifications, investors will be tricked into seeing numbers they would like to see.