Secondary Listings Impact on Coin Prices
Purpose of the study: to show how secondary listing influences coin prices.
It is widely known that an additional listing on exchanges with a good volume should positively affect token prices. Is it actually true? How much does the coins price change? Find the answers to these and other questions in our article.
In the initial sample in the study we used APIs of 56 exchanges: kucoin, upbi, poloniex, bleutrade, binance, coinex, hit-btc, bitibu, nova, southxchange, ethfinex, dx, bigone, btcalpha, coinbasepro, bittrex, kraken, cobinhood , tidex, coinfalcon, btctradeua, indodax, coinegg, coss, liquid, exx, bithumb, kuna, independentreserve, dsx, coinone, bequant, okcoinusd, buda, coinbaseprime, gdax, binanceje, bit2c, therock, zaif, bitso, coinfloor , itbit, oceanex, btcbox, coinmate, luno, bl3p, paymium, lakebtc, coincheck, chilebit, foxbit, surbitcoin, urdubit, vbtc. This list of crypto exchanges was built on the fact that they create pairs listed on the exchange and OHLC candles (open high low close), based on which we can determine the date of the first daily candle on the exchange for a specific pair.
The study did not take into account stablecoins and Top 5 coins — Bitcoin, Ethereum, Ripple, Litecoin, and Bitcoin Cash.
At the first step of our analysis, we revealed the coins yield a week before listing, a week after listing, the result of these two weeks, and also their amount in the context of exchanges.
We believe that the appearance of coin trading in less than a week on the “second exchanges” after the initial listing is not a secondary listing of the coin, but a “delayed primary” listing. At the same time, we had to remove listings with extremely high price volatility, as they greatly affect average performance. Among them:
and some others.
As a result, we got the following number of secondary listings on exchanges:
The more count of coins in the sample, the more we trust the average profitability indicators (exchanges that listed less than 5 coins at the secondary stage did not get into our analysis and further charts). Three exchanges have a clear advantage by this indicator: Nova, Hit-btc, Upbit (Fig. 1). We can say that these exchanges pursue an active policy of adding new coins to their platforms. On the one hand, it’s good, on the other hand, there is a high probability that a large number of cryptocurrencies/tokens quoted on these exchanges are a scam.
By the coins yield dynamics for the week before the next listing, we see the following picture:
A week before the listing, the average coins yield was above zero, so we were right at the beginning of the article. We can assume that the quick appearance of the token on the exchanges located on the right side of the histogram (Fig. 2) (indodax, coinone, bithumb) is more likely a negative factor for speculative buying than a positive one. It is worth noting that with all the hype happening after another secondary binance listing, it takes only the fourth place for this indicator with an average value of 20.09%. Given that not all cryptocurrency exchanges are in our sample, the value is pretty modest.
However, let’s see what happens with the average coins yield on exchanges after the secondary listing:
Based on the big picture, we can talk about the speculators’ profit fixation. But there are also some exchanges with next week demand being more than supply.
The result of these two weeks around the secondary listing (with the listing date in the middle) is extremely mixed:
You can’t state for sure that secondary listing is a positive thing on the market, although larger exchanges are on the left side of the histogram. But if we take the median value of the returns, we will see that in most cases a secondary listing reduces the value of digital assets.
Now, let’s take the data from 04/01/2018 — the period when Bitcoin completed its correction after rapid growth. Thus, we will see the relevant data for the secondary listing.
Putting a filter for the number of secondary listings greater than 4, we examine the overall result of the coins yield for two weeks (Fig. 5). Compared to Figure 3, we see a slight drop in volatility. Such dynamics, in our opinion, due to higher requirements for projects for token listing and maturation of the crypto assets market. Out of all the exchanges presented in the sample, a yield drop after the secondary listing of the Ethfinex exchange is quite striking, which gives us reason to assume that the interest of traders in this exchange decreased, as well as the quality of assets listed.
To consider the big picture of profitability for a given period, we also added median returns (Fig. 5.1). We see strong discrepancy between the median and average indicators in Binance and Nova exchanges. This discrepancy may be due to the secondary listing of quite diverse assets and/or fraud with the coins price of some listed projects.
Comparing the histograms 5.1 and 4.1, we see a sharp rise in the profitability of the secondary listing on Bittrex (the Kraken exchange fell out of the sample after the quantity filter and filter from 01.04.2018). It shows the excellent reputation of the exchange. Unfortunately, we see only one exchange with above 10% of the median profitability, and it’s in another temporary sample (there it is Kraken, here it is Bittrex).
Seeing such a noticeable discrepancy between median and average returns, we can argue that secondary listing is more likely to be a loss-making process for coin holders.
Next, let’s take a look at the number of secondary listings by the month from 04/01/2018, broken down by exchange:
Figure 6 shows data on the number of secondary listings on different exchanges in certain months from April 1, 2018. In the Top 5 on this indicator, we see a steady situation for months except for the Upbit exchange. In December 2018, it listed 161 coins. This may be due to obtaining certificates (In December 2018, Upbit became the first cryptocurrency exchange in the world to receive certifications from the Korea Internet and Security Agency for Information Security Management System (ISMS) and the International Organization for Standardization (ISO) for information security (ISO 27001), cloud security (ISO 27017) and cloud privacy (ISO 27018). But more of this behavior is characterized by a sharp change in the exchange policy to “make money on a large number of traded instruments.” Considering that in this period the coins were at the lowest local price levels. As a result, Upbit is far from the first place among exchanges in our sample in terms of profitability before and after the secondary listing when filtering data from 01/01/2018.
There are other exchanges located in the green zone, which listed most in one month, among them Coinex, Exx. Coinegg, Bigone, Bithumb also listed coins in one month, but they showed a negative result.
In Figures 7 and 8, we captured the total average and median profitability for 14 days (a week before and a week after the secondary listing) on exchanges. We can see from the graphs that cherry-picking was possible only in April 2018. After that, there was a decline. The negative difference in the median in relation to the average is caused by the listing of a large number of scam coins, which on the downtrend of the cryptocurrency market could not show a positive return in any way, even taking into account the period of increase in their liquidity.
Analysis of volume and coefficient of variation
Everyone knows that with increasing volatility in the market, as a rule, the volume should increase, and vice versa. Concerning this, we decided to look for anomalies in the secondary listing in connection with this correlation.
First of all, we took the volumes and coefficient of variation for coins 14 days before and 14 days after the secondary listing on individual exchanges and analyzed their relationship. As a result, we calculated the value for each coin in the following formula:
(Ca*Vb) / (Cb*Va)
where Ca is the coefficient of variation for the coin 14 days after the secondary listing,
Cb is the coefficient of variation 14 days before the secondary listing,
Va is volume 14 days after the secondary listing,
Vb is volume 14 days before the secondary listing.
On a large sample of coins on exchanges, this median value should tend to be 1. But even a small one will be enough to see anomalies (Table 2).
Next, we derived the average value of the volume and coefficient of variation for coins at all exchanges after the filter by the number of secondary listings (> 4). In the range below 1, Kraken 0.72, Bittrex 0.72, Coinbase 0.67, Poloniex 0.55, Binance 0.46 exchanges are leading in decreasing. For the increasing part, only Zaif exchange with a value of 2.43 stands out (secondary listing is only 6 coins).
A strong shift to the lower side can tell us about an increase in trading volume after the secondary listing and (or) superior volatility to the secondary listing. Factors that increase the imbalance of this value in a smaller direction:
1. Prior to the secondary listing, coins were available only on scam / unsafe exchanges
2. Traders desire to speculate specifically after the secondary listing.
3. Obtaining insider information about the imminent listing on a “decent” coin exchange.
4. The interest of the big player to keep the price in a certain range after the secondary listing.
5. The winding-up of the volumes of exchanges that conducted the secondary listing.
A shift of the value to a larger side may indicate a negative perception of investors of the new exchange, which is extrapolated to a decrease in the trading volume of coins and/or high volatility of coins on the new exchange, which in most cases indicates collusion of bidders.
A closer look at some individual cases of a secondary listing
In addition to the Upbit exchange, which listed a large number of coins in December 2018, we can distinguish two more smaller exchanges with better performance, due to the most successful time of the second listing. Among them, Coinex and Nova.
Despite the fact that Coinex listed most of the coins in April 2019, we believe that the exchange approached the choice of instruments more carefully. Enough to mention the time of listing tokens of such projects as ChainLink, Decred, HyperCash, Holo, and Egretia (Figures 9–13). In addition to the positive trend of profitability during the secondary listing of coins on this exchange in the short term, we can also consider the quality of projects for investing in their new tokens for the long run.
The situation with Nova exchange is entirely different. The exchange is listing everything, and all positive yield examples can only be interpreted as pumps and dumps schemes that are not confirmed by anything. This characterizes the quality of the exchange and the instruments traded on it. The instruments traded on this exchange are mostly illiquid, and this allows all kinds of manipulators to make a profit on other inexperienced market participants. To make it sure, it is enough to randomly present several graphs of coins from Nova exchange (Figures 14–17).
Key findings
The variability of the analysis of the results of the secondary listing of coins can be different, but in general, the secondary listing does not lead to an increase in the prices of cryptocurrencies/tokens. It does not mean that you cannot make money on price movements during the secondary listing of coins, but you should consider each case separately: you need to take into account historical data, the reputation of a particular exchange, and evaluate the quality of the project. At the same time, as we have noticed, no one is safe from manipulation by market participants. In this regard, we believe that the mathematical expectation of the return of an inexperienced investor/trader trying to make money on a secondary listing will be negative.
This study is prepared by Squilla Research Team. Special thanks to Alex Bogucharskov.
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