According to unnamed sources in the industry, cryptocurrency exchanges are charging between $50,000 to $1 million to list initial coin offerings (ICOs) on their platforms — as reported by Business Insider. As one might expect, many of those who spoke to BI were unable to name the specific exchanges they have dealt with.
Exchanges wield a lot of power in the crypto markets and access to more prominent ones can mean the difference between success and failure for new projects. In the eyes of many, these seemingly high rates reflect a large power imbalance between exchanges and crypto projects. Michael Jackson, a partner at venture capital firm Mangrove Partners said;
“Basically there are a lot of people who want their coins listed. The exchanges are where the liquidity is — it’s where the money is — so that’s where the power is just at the moment.”
For startups, ICOs offer a quicker and potentially more lucrative alternative to traditional growth methods like venture investment or going public. For investors, these tokens provide exposure to red-hot sectors and provide the ability to quickly and easily trade their stake in a project — something not traditionally possible with early-stage investments.
The problem is that in order to access this liquidity, companies issuing tokens have to get listed on at least one of the many cryptocurrency exchanges. Like stock markets, these online exchanges — based across the globe — offer a venue for people to trade tokens.
Take Oliver Bussmann. Bussmann has advised a number of high-profile cryptocurrency projects — like Ripple and IOTA — and is the president of Switzerland’s Crypto Valley Association, a public-private partnership promoting the region of Zug as a hub for cryptocurrency businesses. The former CIO of UBS, who now runs his own Swiss fintech advisory firm, told BI:
“If you prepare for an ICO, you have to prepare for a listing. It’s important to get access to liquidity. That means the bigger the exchange is, the more effort and also more cost to get listed.”
When asked how much fees to list on exchanges are, he said, “At the lower end it’s $50,000, up to $1 million — I’ve heard that. It’s depending on the size of the exchange.”
Other industry sources have confirmed this price range, like Jackson: “I was doing a project, I won’t tell you specifically what one — one token on a number of exchanges — and that was the ballpark we were in.”
There are others, too: the CEO of one company planning an ICO told BI that they had been asked for $1 million by a top-tier exchange to list their coins. The company, as expected, declined to be named or to name the exchange or speak publicly about the issue, as the whole process is currently under a nondisclosure agreement.
Not All Exchanges Are Equal
Not all exchanges are equal, which is why the range of fees varies greatly. The 24-hour trading volume of Binance — which is currently the second biggest exchange in the world — sits at $1.7 billion as of today (according to CoinMarketCap.com). Bitstamp, the tenth biggest exchange globally, had a volume of $334 million — around a sixth of Binance.
This is important, as access to the “best” exchanges carries a premium: the bigger the liquidity pool, the higher the potential market value of a coin, and the higher the chance of success for a project.
“Good exchange means a high probability of good market fit, because you have access to liquidity and investors,” Bussmann said. “If you don’t get access to certain exchanges, then it’s tier two exchanges, which means access to investors is limited.”
All said, there are counter-arguments: the exchanges aren’t doing too badly themselves. Bloomberg estimated earlier this month that the top ten exchanges are making as much as $3 million a day in fees, this based on calculations from publicly available volume data and trading fees.