Over the past few years, the number of Cryptocurrency Exchanges in the global markets is on a steady rise. Cryptocurrency exchanges are opening up at a rapid speed, cashing-in on the crypto boom. There are hundreds of cryptocurrency exchanges in the markets today. While the biggest source of income of exchanges is the fee that they charge their customers during the trade, there is also some amount of money that they charge new cryptocurrency tokens or ICOs to list on their platform.
Reports from Business Insider reveal that cryptocurrency exchanges are charging up to $1 Million to list these new tokens on their platform. Depending upon their daily trade volume, cryptocurrency exchanges charge anywhere between $50,000 to $1 Million to these ICOs. It is a cost even higher than getting listed on most stock exchanges. Cryptocurrency analysts and ICO advisors have been complaining that this cost is too much and have termed it ‘pure capitalism’.
With over 900 ICOs taking place in 2017, it was the biggest year for ICOs, ever! Investors who put their faith and their money in these ICOs believe that one day their token would be traded in the markets and would become a popular cryptocurrency. However, getting good listings comes with a price. However, many ICOs are promising their investors that they will be listed!
Business Insider surveyed multiple people who have had their ICO listed or are planning to have it listed, or have advised aspiring ICO listings. While there are no names which have been divulged in this survey conducted by Business Insider, those surveyed have claimed that some of the top exchanges are involved in this process. Exchanges hold a lot of power in the world of cryptocurrencies - getting an ICO listed on an exchange with a high trading volume would mean that the token gets more attention and a higher cash flow.
Cryptocurrency exchanges charge ICOs for getting listed based on the kind of daily trading volume that they have. There are hundreds of cryptocurrency exchanges operating today. The top 100 can be seen at Coinmarketcap. Sorting them by their daily trading volume reveals that exchanges such as Binance easily trade over $1 Billion every day, while other exchanges such as Bitstamp trade in $200-$300 Million range. Considering that Bitstamp is the 10th largest exchange, the daily trade volume keeps dropping as you move down the list.
Oliver Bussmann, the former CIO of UBS who now runs his own Swiss fintech advisory firm, told Business Insider: “Good exchange means a high probability of good market fit, because you have access to liquidity and investors,” Bussmann said. “If you don’t get access to certain exchanges, then it’s tier two exchanges, which means access to investors is limited.”
Usually, the top few cryptocurrency exchanges are very selective about letting ICOs list on their platform as they have a credibility to maintain. However, other cryptocurrency exchanges which don’t have a high trading volume are constantly on the lookout for more earning options and ICO listings happens to be one of the best such means of making a quick buck for the exchanges.
While it is not illegal to charge an astronomical amount of money to the ICOs looking forward to listing themselves, it is considered immoral and looked down upon. However, this is a harsh reality of the capital-driven system that we live in today. Cryptocurrency exchanges undoubtedly play a major role when it comes to the success of a currency. This isn’t just the case with ICO tokens, but with well-established names too. Recently, we saw a 5% spike in the price of Ripple when the rumours of Ripple being listed on Coinbase broke.
To conclude, cryptocurrency exchanges hold a lot of power in the crypto-markets! “It’s too much,” Bussmann said. “$1 million is too much. Usually, if you do a proper ICO, with legal, accounting, etc. it’s half a million to a million. Then another million for listing? It’s not a fair relationship.”