Coinbase effect fails to work for Binance, OKX, as new token listings prove catastrophic
|- The Coinbase effect, where up-and-coming cryptos undergo massive rallies when newly listed, has failed for Binance and OKX.
- Everyone that bought the recent token listings on both CEXes has lost money, with double-digit percentages flushed down the drains.
- Experts attribute the catastrophic launchpad to a shortage of volume and liquidity on both platforms relative to DeFi alternatives.
It is a sad day for everyone who bought the recent listing on Binance and OKX exchanges as reports of catastrophic losses come in. The two centralized exchanges (CEXes) have failed to achieve the Coinbase effect, a move that has resurfaced the decentralization argument, where traders compare new listings on CEXes against the decentralized exchange (DEXes) alternative.
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Coinbase effect fails to work for Binance and OKX
Coinbase effect, the notion where new tokens listed on the exchange rally massively, has failed to apply to Binance and OKX exchanges. A decentralized finance (DeFi) researcher has revealed devastating news about stark losses incurred by retailers that bought into the new listings on the two CEXes.
Everyone who bought the recent token listings on Binance has lost money:
— Ignas | DeFi Research (@DefiIgnas) July 28, 2023
• $WLD: -8%
• $PENDLE: -18%
• $ARKM: -25%
• $MAV: -44%
• $FLOKI: -50%
• $SUI: -53%
• $PEPE: -60%
Conclusion: Retail isn't rushing to buy your bags. pic.twitter.com/jawvrB31QA
Everyone who bought the recent token listings on Binance has lost money:
— Ignas | DeFi Research (@DefiIgnas) July 28, 2023
• $WLD: -8%
• $PENDLE: -18%
• $ARKM: -25%
• $MAV: -44%
• $FLOKI: -50%
• $SUI: -53%
• $PEPE: -60%
Conclusion: Retail isn't rushing to buy your bags. pic.twitter.com/jawvrB31QA
Recording losses from as low as 6% to as high as 90%, retail traders for the new listings have suffered a long walk to "Goblin Town" after the tokens dipped to unprecedented lows. Among them, Pepe coin (PEPE), Sui token (SUI), Floki Inu (FLOKI), Maverick Protocol (MAV), Arkham (ARKM), Pendle (PENDLE), and Worldcoin (WLD) for Binance exchange.
The sample was just as ugly for the OKX exchange, whose Frax Share (FXS), Suiswap (SSWP), Ordinals (ORDI), Pulsechain (PLS), Cetus Protocol (CETUS), and Love Hate Inu (LHINU) listings recorded losses within the same range.
The main reason why tokens tend to rally upon listing on CEXes is that compared to the DEXes alternative, centralized exchanges have better due diligence backed by more stringent regulatory requirements before a coin can be listed on the exchange. This makes it easy for investors to trust the project and buy. The ensuing buying pressure results in stark price surges lifting the asset's value from inception.
On the other hand, decentralized exchanges such as Uniswap, SushiSwap, PancakeSwap, and others are easy-entry exchanges, which explains why scams and rug pulls populate them. The amount of scams on DEXes has made it very discouraging for some investors.
DeFi users can buy tokens earlier, before they end up on CEXes.
— Ignas | DeFi Research (@DefiIgnas) July 28, 2023
But there is so much trash on DEXes, so you need to be careful about what you buy, while CEXes (usually) do better due diligence.
In any case, you need to put some effort to make $$$
DeFi users can buy tokens earlier, before they end up on CEXes.
— Ignas | DeFi Research (@DefiIgnas) July 28, 2023
But there is so much trash on DEXes, so you need to be careful about what you buy, while CEXes (usually) do better due diligence.
In any case, you need to put some effort to make $$$
Possible reason for epic dips
A possible reason for the value slumps in the new listings is volume and, therefore, liquidity shortages for new assets. Binance exchange’s CEO Changpeng Zhao has repeatedly reiterated how traders acting on impulse can lead to temporary distortions in the market.
Sometimes there is a shortage of funds to support prices after traders and investors chase the 'sell the listing news" narrative. The ensuing buying pressure causes a value surge that is short-lived – it eventually proves unsustainable because of liquidity shortages.
Another explanation is that investors bought the tokens in huge chunks during their presale stages at discounted rates or early-investor prices. Upon listing, some traders look to sell their holdings for immediate profit, with the ensuing selling pressure causing value dips.
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