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Binance new coin investment return analysis, targeting the exclusive curse of Top 1.

0xLoki

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Is it a curse of being Top 1 or an inevitable result of a sluggish market?

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Original author: Loki

According to the Binance Listing announcement, during the 13-month period from April 29, 2022 to June 4, 2023, Binance has newly listed a total of 20 spot-trading tokens, including 6 new coins (OP, APT, ID, ARB, EDU, SUI) and 14 old coins (listed on at least 1 other trading platform for more than 3 months).

According to these data, we can calculate three rates of return:

1) Yield since listing (closing price) to date.

2) On-line (closing price) to on-line 7 days (closing price) yield.

3) ROI since launch (closing price) for the past 7 days.

One, Binance Yield Comparison

The average holding return of 20 projects is -22.3%, while the average return of BTC during the same period is 7.9%, indicating a significantly inferior price performance compared to BTC. Only ID, RPL, and LDO outperformed BTC during the same period, while the remaining 17 projects underperformed BTC during the same period. RPL had the highest return compared to BTC, leading by 26%, while OSMO had the lowest return compared to BTC, lagging behind by 96.6%.

Considering the listing effect of Binance, the listing day may have a locally higher price. Therefore, we use T+7 as the benchmark date for calculation. The average return rate of the 20 projects obtained is -11.3%, which is better than BTC in terms of the number of projects with significant improvement, increasing to 6. However, it still lags behind the average return rate of BTC (9.4%).

This data indicates that the "listing effect" has to some extent lowered the holding return rate of new coins on Binance. Even if users start buying from T+7 days, they still face a relatively high probability of loss.

Next, we will try to be a short-term speculator, buying on the day of listing on Binance and selling 7 days later. Unfortunately, we can only achieve a return rate of -11.8%, which is worse than BTC's -1.6%. Out of 20 purchases, only 5 were profitable, 6 outperformed BTC, and most of the remaining attempts lost to BTC and resulted in losses.

First of all, one thing we can be sure of is that all 14 old coins launched on Binance are fundamentally sound and have been market-tested, covering popular tracks such as L2 and Shanghai upgrade, objectively speaking, they do belong to the "high-quality coins". Under the premise that the project fundamentals or Binance's screening standards are not problematic, there are three more likely reasons:

(1) The timing of the launch is delayed.

This is more evident in popular topics such as MEME and ETHMerge concepts. Binance launched Floki and Pepe in May 2023, by which time they had already been almost fully launched on all trading platforms. The launch times of LQTY, OSMO, and RPL were also slightly delayed. This lag also reflects to some extent Binance's insufficient attention to industry hotspots, especially bottom-up hotspots.

(2) Binance's liquidity advantage becomes a dumping ground

According to Tokeninsight's statistics, Binance's spot trading volume in 2022 accounted for 58.98% of the entire market, which is 6.44 times that of the second-ranked OKX. Binance has the largest number of users and the highest trading volume. Listing on Binance means more attention from investors, but this liquidity advantage can also become a dumping ground for projects, both in terms of volume and price.

(3) [Listing effect] has exhausted the growth space.

This issue has been analyzed before. In the first 7 days after being listed on Binance, the average return rate of 20 tokens was -11.3%, significantly reducing users' investment returns. If we exclude 6 new coins, the average return rate of the remaining 14 coins is -18.1%, which is even more significant.

Building on this foundation, let's look ahead because the "listing effect" not only affects the price after listing, but also results in significant gains before listing. We selected 14 established coins and calculated the rate of return from the day of listing on Binance to 7 days prior to listing (excluding 2 MEME coins and 6 new coins due to their exaggerated realized gains, and because the decision to list MEME coins is driven more by market hype than fundamentals):

It can be seen that the "listing effect" of Binance is very obvious. Except for LDO, the remaining 13 new coins on Binance have all shown significant gains, with an average increase of 35.8%. (During the period when LDO was listed, the price of BTC fell from 39K to 29K). Even after deducting the return rate of -22.3% since listing, a return rate of 13.5% can still be achieved.

Three, Listing Effect: The Exclusive Curse of Top 1

After the above analysis, we can find that the "listing effect" has overdrawn the growth space, which is the main reason for the poor performance of newly listed tokens on Binance. This also explains the difference in perception between Binance and its users:

From the perspective of Binance, a reasonable process was followed to select tokens with good fundamentals for listing. If one buys the token before the listing decision is made or when Binance decides to list it, even if the market cycle is extended, one can earn returns higher than the market average.

From the perspective of a user, I bought a newly listed token on Binance and ended up losing X. The reason for this problem is due to the "listing effect", where a 35% increase in price eroded the potential for the token to rise further, leading to irrational or excessive investment. So the problem is simple: starting from a 35% disadvantage, how can Binance's new tokens achieve excess returns?

In fact, the excessive investment of the "listing effect", the late listing time (because of the need for more caution), and the liquidity advantage becoming a dumping destination are unique to Binance. In addition to these, there is also widespread controversy over IEO, layoffs (or personnel optimization), and Labs' investments. However, no one cares whether the executive of the 10th-ranked trading platform has a best friend, and no one cares whether the 50th-ranked trading platform has layoffs today. These are all exclusive curses for the industry's Top 1.