BINANCE REKT: BCN Delisted; Breeds Discussion Around Algorithmic Selling To Avoid Complete ‘Low Liquidity’ Disasters

Binance, the world ’s largest crypto exchange delisted 4 crypto tokens today. This is an interesting development and there are two ways to look at it. 

These tokens were listed on Binance about six months ago and as everybody in the industry knows listing fees have been a major source of revenue for the exchanges. There were rumors that in the spring of 2018 companies were being charged up to a million dollars per listing.

So Binance has been paid upfront for these services and one can say that 6 months ago these projects were not necessarily world beaters, yet they were listed for no other consideration but the listing fee. 

Consumer protection does not seem like it was a factor and now delisting these tokens seems strange in a way. “We will take your money but will kick you out anyway. Thanks for playing along.” 

I am curious if the listing agreements for these tokens had clauses or clawbacks connected that 6-month duration?

I can certainly see people looking at this news from that standpoint, but I see it differently. To me, it is a sign of how quickly this industry is moving forward and maturing. 

Yes, 6 months ago, the listing game was all the rage and many tokens that had no business to be listed anywhere let alone offered to the public were traded on multiple exchanges.  

Today the industry is increasingly legitimizing and Binance is leading the change by taking on the task of reviewing the products they list and trying to protect their customers by making the listing process more transparent. Donating all listing fees to a charity is just a proactive way of dealing with the delisting of these 4 unfortunate coins. 

It wouldn’t surprise me if Binance reverses that policy in the future and starts taking the listing revenue in again at some point. The point is that the listing process will be more disciplined and coin due diligence will be more rigorous and transparent. This is the sign of a quickly maturing market.

Some additional important questions: what can investors do in this situation and what can investors do if they are holding a portfolio of thinly trading tokens? 

First of all, I hate to say this but buyer beware; investors should be doing a much better job analyzing tokens, and it doesn’t matter if these are utility or security token as these are investment instruments. So investors need to dig in, these are at best very risky startups, so check out the teams, market opportunity, product fit, etc, etc, etc. 

But beyond that, if people are holding a thinly traded instrument the selling of these tokens is often hard as it is too easy to move the market by “crossing the spread” and not in a good direction. 

Leaving large limit orders is also not a good idea. That order becomes visible to other market participants and people will move the market away from your order in a heartbeat. 

One option is to use traditional Wall St. algorithmic trading methods to camouflage bigger sales by blading your orders into all outstanding orders.  Algorithmic selling services can help to provide relief to some of these coin holders. These practices have been successfully leveraged in the FX markets for years and are a safe and discreet way to reduce risk.

**This article was written by Dan Raykhman, CEO of RFO Capital.

Full disclosure, my firm RFO Capital is offering algorithmic selling services, for more information click here: http://consignment.rfocapital.com