From cointelegraph by Zoltan Vardai
Binance’s co-founder has addressed concerns over the exchange’s token listing criteria following the rapid rise and fall of the Test (TST) token, which briefly reached a $500 million market capitalization.
Most retail cryptocurrency investors allocate capital through centralized exchanges (CEXs) like Binance and Coinbase, with CEX-listed tokens getting significant attention and high investor demand.
The most important criterion for a token listing is its return on investment (ROI), which is calculated by comparing its first-day average price to quarterly performance across other CEXs, Yi He, the co-founder of Binance, told Colin Wu in an interview published on Feb. 10.
Binance’s second benchmark is the project’s ability to bring innovation and new users to the industry that may “evolve into dedicated blockchain users over time.”
The third and final criterion, involving “high-profile projects with significant market buzz and valuations,” examines a token’s market performance on other major exchanges. If a token with a “strong technological appeal and market hype” is “not listed on Binance, we risk losing market share,” He said, adding:
“These three standards help us cover a broad range of projects, including highly popular “VC tokens,” projects with strong long-term potential, and even memecoins, which often generate significant hype and wealth effects.”
He’s clarifications come shortly after Changpeng Zhao, co-founder and former CEO of Binance, said that “the Binance listing process is a bit broken,” due to the arbitrage opportunities used by decentralized exchange (DEX) traders that led to poor performance shortly after the listing.
DEXs are generally used by advanced traders to spot emerging cryptocurrencies before a CEX listing announcement, which is often used as a short-term buy signal for DEX traders who sell the token once it gets listed, causing significant selling pressure.
Related: Austin University to launch $5M Bitcoin fund with 5-year HODL strategy: Report
Binance enforces strict regulatory and internal compliance measures. According to He, Binance’s internal investigations uncovered over 120 cases of misconduct, leading to the dismissal of 60 employees.