There are so many people claiming that crypto exchange is an important enabler for the success of a new token. Well, this is partially true, as there is a hidden “flip” side, which we were able to uncover here at DISCOPERI, Inc. in a preparation for our upcoming ICO (details — here: https://t.me/discoperiinc and https://t.me/discoperi_ico)
The approach: To get a real situation we investigated more than 100 crypto exchanges and we considered those with the daily liquidity of $25+ mm (which is fairly low threshold). We also considered different tokens, which are there traded there, and checked their historical behavior from the day 1, when they entered the exchange (right after the ICO) until the date of the analysis. We only checked tokens which were released less than a year ago.
Results were quite astonishing
In fact, nearly 90% of all checked tokens, which are traded on exchanges today, lost btw 60–70% of their values during the first week (from the ICO price). Then, during the next 6–10 months less than 25% were able to recover. Wow! That looks quite tricky, as you would typically expect that #cryptoexchange charges you a lot for bringing you some value. In fact, maybe yes — if you consider the longer period and/or you have an exceptional project.
So, what may be the reasons of such weak performance. As we see it, there are three potential reasons, which cover most of the cases:
- Price of the token is way too high, which implicitly means that the market forces will try to bring it to the equilibrium of demand & supply.
- Token/Coin has been sold (prior/during the ICO) with heavy discounts, which erased the value, giving an ability to initial investors/contributors to sell and close their positions.
- Project doesn’t deliver on the promised timeline and milestones, which also shifts the demand/supply balance towards “sell”.
Reasons above aren’t the only underlying factors. I have heard stories about manipulations (both from a startup & exchange sides), bad post-ICO marketing, high rate of speculators within the initial investors group, etc. However, the observed fact shows us a problem, which has to be considered by everyone on cryptocurrency market.