In mid-2018, an estimated 800-1,000 digital currencies had proven to be nearly worthless.(1) Many suggest that a reason for this crypto fail is that too many coins got on an exchange too soon, before establishing a strong foundation built around value.
While getting listed on an exchange quickly has traditionally been the clarion call in the cryptocurrency space, many projects, like Kala, have decided to wait until the right time. Here are five reasons Kala has strategically chosen to be selective on the timing in listing on an exchange.
1. Exchanges Don’t Bestow Value
Some may be under the mistaken impression that an exchange automatically gives a coin value. In reality, there are several elements that establish cryptocurrency value that are independent of an exchange, like:
- Utility – Perhaps the biggest factor in a coin’s value is its utility. The more useful a coin is, the more value it will have.
- Innovation – Cryptocurrencies who carve out a solid niche and can stand on their own have more appeal and longevity, which translates into a higher value.
- Supply and Demand – Supply and demand is a big factor that determines the value of anything that can be traded.
- Strength of the Community/Network – The number of users who use, mine, trade, or conduct transactions is a good indicator of the strength of that currency. The stronger the community, the more crisis-resistant the cryptocurrency is.
The Kala team has been and continues to build out the ways that give Kala real, lasting value.
2. Exchanges Are Expensive
After a coin passes an exchange’s vetting process, obtaining a listing often involves paying exorbitant fees. The fees can range from $100,000 to $3 million, with a standard rate for a large exchange around $1 million.(2)(3) Young companies like Symatri must determine how to strategically use funds to best reach long-term goals.
3. Exchanges Maintain Control
Even after getting listed on an exchange, it’s not always smooth sailing. Many exchanges maintain full control, and there have been instances of exchanges delisting coins/tokens without warning. With the cloud of nebulous future regulation hanging over the cryptocurrency market, sometimes exchanges may delist if they are simply nervous. It is in a currency’s best interest to have a strong foundation and be as stable as possible before becoming subject to an exchange’s control.
4. Price Manipulation Is a Real Concern
At this time, the majority of crypto exchanges are only lightly regulated, leaving room for sometimes shady or abusive maneuvers. It has been reported that crypto exchanges use bots to manipulate the prices of coins. “Last September, cryptocurrency trader and analyst Alex Kruger exposed a promotion on Bithumb which inflated the trading volume on the exchange.” (4)
5. Trading Manipulation May Be Rampant
Some crypto experts have sounded the alarm that there is widespread manipulation of trading on exchanges. In March 2019, Forbes reported on a study that warned that much of the bitcoin and cryptocurrency trading volume on some of the world’s largest exchanges may not be “genuine,” with researchers finding that almost 90% was questionable. (5) One expert stated: “due to the deregulated nature of both cryptocurrency and their markets, manipulation is more rampant in the cryptocurrency markets than virtually anything else you can trade.” (6) It’s natural that some crypto projects are slow to jump into an environment that needs more stability itself.
For each problem an exchange listing solves, it introduces several more. As news.bitcoin.com points out, some coins may choose never to go on a public exchange, or to wait years until it’s a more solid environment. (3)
Kala’s strategy is different than many other cryptocurrencies. This is deliberate; we don’t want to be another worthless coin statistic. The Kala Team will continue to monitor all the factors involved, and pursue an exchange listing at the right time, with the right framework, and ultimately at the right value. See more about Kala’s Roadmap HERE.