Definition and Causes of Coin Delistings from top Crypto Exchanges (2024)

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A crypto token is a digital asset that resides on a decentralized public blockchain. It is not issued or controlled by a single entity. It is this trait that fundamentally sets crypto apart from other asset classes. A user invests in a crypto asset as they expect the underlying technology and the project it represents to grow in adoption—as against the expectations of a company to do better in the market.

But sometimes, projects go off-track. Or show cracks that were previously unseen. When that happens, crypto exchanges—the gateway to the decentralized world—delist the coin from their platforms, to protect the investors from the downsides.

Delisting of coins may seem like a harsh step in the eyes of many—the ethos of decentralization and all—but exchanges take such steps when their evaluation and risk assessment of the coin raises red flags, and conclude that user’s investments may be exposed to unusual risks or even fraudulent behavior by the project developers.

Delisting by major crypto exchanges does not mean the project ceases to exist—exchanges are an intermediary between the project and the investors. Coins that have been delisted by major global exchanges, most often, experience a sharp fall in price. This is to say, timely delisting by exchanges has protected user investments.

Reasons Coins Get Delisted From Crytpocurrency Exchanges

QSP, or Quantstamp, was delisted by major exchanges in August 2022.

Between August 4, 2022—when the first major announcement of delisting was made by an exchange—and October 20, 2022, QSP’s closing price has fallen by over 40%, as per data from Coinmarketcap.

Due diligence and timely intervention by exchange also derisk users from market manipulation. When international exchanges delist a coin, the trading volume on the coins and the liquidity of the coin dry up rapidly. This is, there are fewer sellers and buyers—mostly project developers and early investors.

Generally speaking, In such a concentrated market, the coin holders could artificially inflate or deflate the price of the coin through. For instance, the project developers could create an impression of high demand for the coin on decentralized exchanges and other markets by buying and selling coins among themselves or their own wallets. Called wash trading, such fraudulent behavior could induce false hopes in the market that the coin or the project continues to have a high uptake. By delisting the coin, exchanges isolate their users from such market manipulations.

Due Diligence by Exchanges

Responsible crypto exchanges continuously conduct risk assessment of coins listed on the platform. The evaluation criteria of coins, generally, include: Commitment of the team to continuously work on the project as per the defined roadmap, circulating supply and market capitalization, liquidity, and evidence of unethical/fraudulent conduct or negligence.

Delisting a coin, however, does not forcefully transfer a user’s coin, nor does it liquidate a user’s holdings. On CoinSwitch, for instance, users are informed of the decision and the date of delisting through emails, push notifications, and on social media.

Further, users are provided with a window to sell the coin they hold. If they choose to hold on to the coin, as an exception, they may also be allowed to withdraw their holdings into their private crypto wallet. A network fee will be deducted in case of such a withdrawal.

As always, before you decide to trade in a coin, do your own research.

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