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, the NYSE and the Nasdaq. 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 into Coinbase, Gemini, Kraken, Binance.us, FTX, and Bittrex. 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
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
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 and stablecoins usage recently, I expect altcoin (non-Bitcoin) price increase to follow. Direct listings and IEOs will increase, as recently Coinbase released a list of tokens that 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.
Last week, Bloomberg reported that Western Union had made a takeover offer to MoneyGram.
Unlock new revenue streams for creators and give them more control over the markets surrounding their work.
PDF of the Fidelity Institutional Investors Digital Asset Survey
The largest cryptocurrency exchange in the United States is considering offering support for a variety of new digital assets.
Strengthening network fundamentals support the bullish case for Bitcoin price one month after the halving.
The owner of a now-defunct Romanian crypto exchange called CoinFlux has pled guilty to laundering roughly $1.8 million in a fraudulent scheme involving fake eBay ads and a car wash.
Rumors that India might be considering a new ban on crypto may be premature, according to exchange founders and startup CEOs working in the sector.
IN THE TWEETS
Compound @compoundfinanceProposal 007 has succeeded, and can be executed after a 2-day waiting period. 1,116,310.81 COMP ✅ 0.00 COMP ⛔️ The COMP Distribution will begin on June 15th. https://t.co/Atx5HQF4cO
Cointelegraph @CointelegraphVega is providing early onboarding to market makers planning to launch decentralized derivatives markets on its protocol https://t.co/E35JjVKuqd
NEW PRODUCTS AND HOT DEALS
Crypto exchange OKEx is partnering with peer-to-peer marketplace Paxful to enable new fiat on-ramps for its customers.
The $5.7 trillion asset manager Vanguard has completed the first phase of its pilot testing of settlements for blockchain-based asset-backed securities.
U.K.-based cryptocurrency platform Ziglu has launched, following a £5.25 million (US$6.6 million) seed round. As a starting point, the platform aims to painlessly put crypto in the hands of consumers.
MEET WITH ME
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Hi, I’m Paul Veradittakit, a Partner at Pantera Capital, one of the oldest and largest institutional investors focused on investing in blockchain companies and cryptocurrencies. The firm invests in equity, pre-auction ICOs, and cryptocurrencies on the secondary markets. I focus on early-stage investments and share my thoughts on what’s going on in the industry in this weekly newsletter.
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