Do Exchange Listings Still Impact Digital Asset Prices?
The research below is an excerpt from our Q4 Quarterly Report in partnership with eToro! Read the full report here:
Coinbase Listings: A Primer
Since launching in 2012, Coinbase has rapidly become one of the largest retail onramps for traders and investors looking to enter the crypto ecosystem.
In its first few years of existence, Coinbase was extremely selective in terms of the number of tradable cryptoassets relative to other exchanges such as Binance, FTX, Poloniex, and Bittrex. Coinbase’s large user base, combined with relatively limited cryptocurrency offerings, has created an environment in which new asset listings create massive hype. Being listed on Coinbase means that an asset may go from thousands of prospective investors to millions overnight.
Historical data has shown that Coinbase listings have had a positive effect on asset prices in recent years.
This makes sense, as the crypto markets have been filled with an abundance of retail investors that tend to follow the herd. When a popular retail exchange that accounts for a significant amount of market share decides to suddenly make a new asset available for millions of users, they are usually pretty eager to get their hands on it. With greed, excitement, and fomo (fear of missing out) being the underlying forces for many, any narrative that can potentially be used to their advantage becomes attractive. But how effective are listings in 2020? In this study, we will analyze the effects of Coinbase listings and their impact on digital assets in 2020.
Asset Performance Before and After Listing:
To get a general idea of how Coinbase listings impact the prices of digital assets, we’ll start by looking at the performance of each asset listed in 2020, including 30 days before and after the date it was available for trade on the platform.
By combining the returns of each asset together, we can quickly see some extremes in the data. While most returns fall within a 100% to - 100% range, there are a few outliers. CVC and DNT stand out among the crowd, with returns nearly 3x the size of the others. Now, let’s look at these assets individually over the same time period to see if we can extract more insight.
At first glance, it appears that some assets do in fact spike upward for a brief period after getting listed on Coinbase. Indicated by the green plots, we can see that OMG, ALGO, CVC, MANA, and DNT have increased over the 30-day period post-listing, while the majority decreased. But, on closer examination, we can also see that some assets increased before getting listed, only to start decreasing once available on the exchange. Now what could cause this… maybe insider info? Not quite.
When looking at Coinbase listings, we have to take into account the actual listing date as well as the announcement that an asset will be listed on the exchange. There were a total of 18 assets listed in 2020, while 10 of those had announcements six days before (on average) the actual date that the asset was listed and available to trade. This provides a window of opportunity for traders to buy an asset in preparation for it to be listed on an exchange with millions of users that are eager for new products to trade.
So, we need to separate these two events to get a better idea of what is actually causing these assets to rise.
Do Announcements Make a Difference?
Timing is one very important aspect in the world of trading and investing. Getting in early on an investment can generate handsome rewards, while getting in late can turn into a costly mistake that you wish you never made. Market timing can quite literally make or break a trading strategy. So, can we use Coinbase listing announcements as a way to time market moves? Could this be a chance to get in ahead of the herd and profit before these assets actually get listed on the exchange?
Coinbase Listings Without Announcements
The first table below shows all of the assets listed on Coinbase that did not have an announcement pre-listing. All eight assets saw a positive double-digit increase on the day of getting listed, with the median asset returning +33%. The top three performers were DNT (+173%), UNI (+99%), and CELO (+48%). Half of these assets carried that momentum forward to perform positively the next day, with the median next day return of +4%. It's worth noting that none of these assets retraced their full price moves post-listing.
It’s fair to say that these assets have responded positively to being placed in a new market. Now let's take a look at the performance of the assets that did have announcements pre-listing.
Coinbase Listings With Announcements Pre-Listing
The 10 assets below saw a median return of +24% on the day that Coinbase announced they were getting listed, with nine out of 10 performing positively. UMA (-2.8%) was the only one to sell off on announcement day. The majority of these assets (80%) continued to rise in price after their announcement, up until the day of actually getting listed on Coinbase. This time period varies, but when you take the average gap between the Coinbase announcement and the listing date for each asset, you get a six-day window of opportunity.
The median performance of these 10 assets on the day of actually getting listed is +7.5%. While this is still seen as a positive event, returns aren’t nearly as strong as the assets that got listed on Coinbase without an announcement pre-listing (+33%). And when we look at performance the day after getting listed, we can start to understand what is actually going on here.
On the day of listing, assets that get listed by surprise (without an announcement pre-listing) have outperformed the assets that did have announcements by nearly 4x. They also have smaller drawdowns the next day, typically continuing to push higher while those with announcements suffer from a pullback caused by pre-listing gains. This makes sense, as surprise listings sparked instant excitement without allowing for traders to get in early and profit before the listing date. Any pre-listing announcement creates opportunity beforehand, which in turn causes more selling pressure once the herd finally arrives on the actual listing date.
What’s interesting here is the performance of assets from the time that Coinbase announces a future listing all the way up until the day it's available to trade. This is where you find the highest returns and most lucrative opportunities. As previously mentioned, the average window is six days. The median performance over this six-day window is +43%.
Odds of Price Increase
So, what are the odds of an asset’s price increasing after getting listed on Coinbase? In 2020, every single asset that got listed without an announcement pre-listing has seen a positive price increase on the day of getting listed. Additionally, 70% of the assets that did have an announcement pre-listing were also positively impacted on the day of getting listed.
Now that we know that listings have a positive impact on asset prices, let’s take a look at how Twitter conversations are impacted. The table below shows tweet volume for assets listed on Coinbase without announcements. At the time of writing, CELO, REN, and BAL tweet data was unavailable.
One thing is for sure, new listings definitely create Twitter hype around these assets. The median change in tweet volume on listing date is +1,212%. This doesn’t include Uniswap. As you can see, it is a major outlier here with astronomical percentage changes. Since the launch of UNI was a surprise airdrop, there were essentially no tweets about the token before getting listed. After nearly every major exchange rushed to list the asset, tweet volume surged above 10,000 within a few hours.
In addition to DNT being the best performer among the listings without announcements, DNT also had the biggest change in tweet volume at +5,939%. This rise in conversations continued for over 30 days post-listing. MANA was the only asset to decrease in conversations post-listing.
The table below compares Tweet volume on Coinbase listings with announcements pre-listing. At the time of writing, COMP, BAND, and YFI tweet data was unavailable.
These assets also saw big increases in tweet volume. The median change on announcement date is +621% and +937% on the listing date. We see a similar effect here as we did with returns for each group of listings. The pre-listing announcement creates an initial boost, but ends up producing dampened results on the actual listing date.
It’s clear that listings have a sustainable impact on tweet volume, but what is the sentiment like within those newly formed conversations? Are investors emotions showing through in their language? Are they becoming more positive or negative? Let’s find out.
How Do Listings Impact Investor Sentiment?
Before we dive into sentiment, let us define The TIE’s daily sentiment score:
Below is a measure of how positive or negative conversations on Twitter have been about a particular coin over the last 24 hours vs. the previous 20 days. A score above 50 implies that conversations have been more positive today vs. the last 20 days. A score below 50 implies that conversations are becoming more negative.
Investor sentiment on assets listed without announcements was higher on listing date than assets with announcements pre-listing, along with bigger increases from the day before. The median sentiment score on the day-before listing was 47.2 (neutral/negatively skewed), but increased by 81% to 85.4 (very high) on the actual listing date. Investor sentiment remained high the next day.
We can see that investor sentiment on assets listed with announcements pre-listing was lower overall. The median sentiment score on the day before the listing announcement is 54.3 (neutral/positively skewed), increasing by 54% to 83.5 on the announcement date. Impact on sentiment post-listing is muted for these assets due to pre-listing announcement effects.
The low sentiment scores for assets listing with announcements may support the theory that investors get weary when a future event is telegraphed too far in advance, whereas surprise listings create a fervor that feeds a positive feedback loop for the asset’s returns.
What About Other Exchanges?
Our analysis has shown that Coinbase listings have a positive impact on asset prices, but what about other exchanges? The table below shows the average peak return on crypto assets after a listing announcement on different exchanges.
While Coinbase listings are the most impactful, the peak returns were relatively significant across all exchanges after one day and one week. By comparison: one hour (+0.08%), one day (+3.77%), and one week (+11.79%). OKEx has the highest one hour (+2.24%) returns, while Bithumb, CoinList, HitBTC, Huobi, Poloniex, and BitFlyer have negative one hour returns. Kraken seems to have both the highest oneday (+13.63%) and one week (+36.27%) returns.
Interestingly, these results suggest that, on average, an asset’s value continues to increase for up to a week after the listing announcement. After one week, it can be difficult to attribute the listing as the driving force influencing price increase -2020 did in fact show mostly bullish runs on the weekly timescale. However, such trends should affect all exchange listings equally. This makes it especially convincing that Kraken, Coinbase, and OKEx listings do indeed have an effect on price that lasts a week (or longer).
Our research has found that exchange listings still have a positive impact on digital asset prices in 2020, providing a short-term opportunity for traders to profit. On the day of getting listed on Coinbase, assets without pre-listing announcements (+33%) have outperformed assets with pre-listing announcements (+7.5%) and have also had smaller drawdowns the next day. Tweet volume and investor sentiment follow within this same pattern. But there is another play at hand - the most lucrative strategy for trading exchange listings would be to buy the asset on its announcement date and sell after the asset actually gets listed on the exchange, as the median return during this six-day (on average) time period is +43%.
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