The crash of newly listed tokens

Token listings are like the stock market on steroids. Without the guardrails of traditional finance, prices swing wildly, making—and more often breaking—fortunes in days, if not hours. The Binance Exchange is the most popular listing location for these tokens. They offer high-risk betting and the opportunity to chase market trends. 

A closer look at the listings of Binance suggests these chances are statistically slim. Many analysts believe the odds of success are near zero because most Binance listings have a predictable cycle that involves a pump and dump, followed by no significant recovery.

It is important to ask: Are centralized exchanges driving unsustainable speculation or just the market as it currently exists?

Recent Binance token listings

A similar pattern is followed by many new tokens listed on centralized exchanges. The prices skyrocket in the first few hours after listing and then plummet shortly thereafter to settle at lower levels.

This is a list of Binance’s latest listings.

• LAYER (DeFi) – Listed on Feb. 11, dropped 50% from its listing high.

• TST (Memecoin) – Listed on Feb. 9, dropped 80%.

• BERA (L1 Blockchain) – Listed on Feb. 5, dropped 38%.

• ANIME (Culture Coin) – Listed on Jan. 22, dropped 74%.

• TRUMP (Memecoin) – Listed on Jan. 19, dropped 82%.

• SOLV (DeFi) – Listed on Jan. 17, dropped 78%.

• COOKIE (MarketingFi) – Listed on Jan. 10, dropped 74%.

• AIXBT (AI) – Listed on Jan. 10, dropped 67%.

• CGPT (AI) – Listed on Jan. 10, dropped 68%.

• BIO (Biotech) – Listed on Jan. 3, dropped 88%.

As of yet, there are only Berachain BERA appears to be on the verge of a rebound, owing to strong fundamentals as well as a community that is engaged. What is the fate of KAITO The future of an InfoFi token, which was also listed on February 19, is still uncertain. But across every sector—DeFi, AI, memecoins, biotech—the pattern repeats.

Related: Bybit exchange hacked, over $1.4 billion stETH moved

Are Binance listings uniquely bad?

Some analysts claim that new tokens will be subject to pump-and-dump. Recent listings of other exchanges suggests otherwise. Since Gate.io listed IP (decentralized IP Management) on February 13, the price has risen by nearly 5x. Another good example is HYPE which performed well after being listed on KuCoin in December.

In some cases, when Binance lists tokens that already are traded on other exchanges, the familiar pump-and-dump pattern emerges as well. For instance, CGPT had been trading since April 2023, yet its Binance listing in January briefly doubled its price—before crashing below pre-listing levels.

Another example would be CAT. The token gained 54% in its Binance day listing on 17 December before falling by 86%. VELO tokens, traded from 2022 to the present, jumped up 147% after Binance’s listing in December 13 and then fell 83%. 

The VELO listing that appeared on Kraken in February had little impact on the price.

Why does CEX list tokens in a pump-and-dump manner?

Several factors—alone or in combination—could explain why newly listed tokens dump when trading begins at centralized exchanges.

Insiders and VCs can take advantage of the opportunity to exit. Without vesting, investors can cash out their investments immediately before a real demand for the project has formed. The lack of interest in the project or its real utility could signal a lack of long term value.

A limited supply at the beginning and low liquidity are also contributing factors. Early buyers will drive up prices quickly when a token launches with a limited circulating supply. In this case, as more tokens become available—whether through team unlocks, vesting schedules, or liquidity injections—the artificial scarcity disappears, and the price is set to correct.

Over-engineered speculation and hype could also play a role. Binance, for example, has an enormous user base. Their brand recognition is also a factor. “casino effect,” When traders are rushing in, they expect quick and explosive profits rather than long-term value.

Exchanges could also artificially increase demand in order to get traders to buy anything. Binance, however, has faced similar accusations before. allegations Wash trading is a form of market manipulation that aims to increase trading volumes and demand by using wash trading.

Binance, itself, is not the issue. emphasizes The enlarged version of the original is called a “robust market surveillance framework that identifies and takes action against market abuse.”

The above analysis is not exhaustive but it does suggest that the listing mechanisms of some exchanges are more geared towards short-term speculation than sustainable growth. The exchange can benefit from hype by prioritizing volume. However, this strategy may erode user confidence and attract regulatory scrutiny. 

The hype surrounding new token launches is not just driven by centralized exchanges. Even the Argentine president Javier Milei Recently, it was spotted that Binance is doing the exact same thing. Binance and other CEXs try to reduce the risk by tagging new listings with a warning. “seed” Investments and their risky nature.

This article was written for general information purposes only and does not constitute legal or investment advice. These are solely the opinions, views, and thoughts of the author and may not reflect the opinions and views of Cointelegraph.