Looking at early stage deals in the blockchain/cryptocurrency space, there is quite a bit of overlap between questions asked to companies planning on issuing a token vs those that are not. Some differentiation in questions to companies that will plan to issue a token include:
- Does this company really need to be decentralized?
- Will value accrue to the token?
- What is your token listing strategy?
The last question is important for two reasons: 1) investors need to eventually get liquidity from their investments, hedge funds needing a bit more flexibility in liquidity 2) companies need liquidity to help get tokens in the hands of users, to help diversify their investor base, and to increase awareness for the project.
There are some similarities between the listing process in the traditional stock markets and that in the crypto markets.
How does it work in the traditional stock markets?
In the United States, companies typically look to get listed on either of the two big stock exchanges, theNYSEand theNasdaq. A company can either choose to go through an IPO (initial public offering where they raise capital) or through a direct listing on the exchange (without raising capital). Both exchanges have listing requirements to maintain their reputation and visibility. The most important requirements are size of the deal (determined by annual income or market capitalization) and liquidity (a certain number of shares must already have been issued). On top of those, exchanges have requirements on listing fees, price maintenance, and market making.
How does it work in the crypto markets?
Outside of the United States, token projects can look to two tiers for exchange listings in Asia:
The Tier 1 exchanges are the exchanges with the most liquidity and can command more in terms of listing fees, vesting schedule for team/investors, and price maintenance for direct listings.
Companies must decide whether to get listed on a Tier 1 exchange or a Tier 2 exchange initially. On Asian crypto exchanges, similar to IPOs in the traditional stock markets, IEOs (initial exchange offerings) are a way for token projects to raise capital while getting listed. For those projects look at this path, in addition to price maintenance, vesting schedules, and market making being important, the valuation should be attractive to draw in retail investors and provide a health price.
In the United States, token projects should look intoCoinbase,Gemini,Kraken,Binance,FTX, andBittrex. What’s different about the US crypto exchanges are that there are no listing fees and IEOs.
What can projects do to set themselves up for a listing?
The listing process for each exchange can be very different and opaque. Getting and building a relationship to the exchange in addition to beginning the application process early is a good start. Other ways to build up leverage for the listing process:
- Brand/Investors - recognizable, credible brand which usually includes top investors
- Community - vibrant, global community of developers, supporters, and retail investors. A tool likediscordortelegramhelps facilitate discussion.
- Decentralization - product with users and a strategy around token usage to help de-risk regulatory concerns
- Trading support - market makers and other traders providing liquidity
Conclusion
The queue for projects that want to list on an exchanges is quite tremendous so it’s about putting yourselves in their shoes and how listing your token can contribute to the exchange’s bottom line. So far this year, token listings have been a bit slow but with the rise of Bitcoin price andstablecoinsusage recently, I expect altcoin (non-Bitcoin) price increase to follow. Direct listings and IEOs will increase, as recently Coinbase released alist of tokensthat they are currently evaluating. I believe with some very large infrastructure projects launching/listing later this year, Ethereum 2.0 on the horizon, Asian exchanges expanding to the US, and more liquidity all around, this should be an exciting rest of the year.
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I am a seasoned expert and enthusiast in the field of blockchain and cryptocurrency, with a profound understanding of the intricacies involved in early-stage deals within this space. My expertise stems from hands-on experience and a deep knowledge of the concepts discussed in the provided article.
Now, let's delve into the key concepts addressed in the article:
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Decentralization and Token Issuance:
- Companies planning to issue tokens are questioned on the necessity of decentralization.
- Evaluation of whether value will accrue to the token.
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Token Listing Strategy:
- The importance of a token listing strategy, crucial for investor liquidity and company objectives.
- Similarities between listing processes in traditional stock markets and crypto markets.
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Traditional Stock Markets Listing:
- In the United States, companies seek listing on NYSE or Nasdaq through IPOs or direct listings.
- Listing requirements include deal size, liquidity, listing fees, price maintenance, and market making.
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Crypto Markets Listing:
- Outside the U.S., token projects consider Tier 1 (Binance, Huobi, OkEx) or Tier 2 exchanges for listing.
- Tier 1 exchanges have more liquidity and different requirements (listing fees, vesting schedules, price maintenance).
- IEOs (Initial Exchange Offerings) as a method to raise capital and get listed.
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U.S. Crypto Exchanges:
- Consideration of exchanges like Coinbase, Gemini, Kraken, Binance, FTX, and Bittrex.
- Notable differences such as the absence of listing fees and IEOs.
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Preparing for Listing:
- The listing process is varied and opaque, emphasizing the need for a relationship with the exchange.
- Building leverage through factors like brand/investors, community support, decentralization, and trading support.
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Market Trends and Conclusion:
- Recognition of the substantial queue for projects seeking exchange listings.
- Anticipation of increased altcoin prices, more direct listings and IEOs.
- Factors like the rise of Bitcoin, stablecoin usage, Ethereum 2.0, and expansion of Asian exchanges into the U.S.
In conclusion, the article provides valuable insights into the complexities of token listing strategies, encompassing factors from decentralization to market trends. The evolving landscape and the dynamic nature of the cryptocurrency market underscore the importance of a well-thought-out approach for companies venturing into token issuance and exchange listings.
