While initial coin offerings (ICOs) and token generation events have become a proven and viable means of raising funds for startups in the cryptocurrency space, there’s no denying that often things do go wrong.
Not Good Enough?
U.S. based cryptocurrency exchange Bittrex has announced it will delist 82 tokens with poor liquidity on its platform. The Bittrex team has said that with effect starting on March 30, 2018, cryptocurrencies like BITS, BITZ, CRBIT, CRYPT and 78 other cryptos will cease to exist on its trading platform.
“Occasionally, there are circumstances that lead Bittrex to remove a coin’s wallet or market from the Bittrex Exchange, said team Bittrex, adding that “These actions are taken to ensure customers have access to digital tokens that continue to meet our strict coin listing criteria and have a properly functioning blockchain and wallet.”
The team urged holders of the affected coins to withdraw their digital assets to other wallets before the set date as failure to do so would lead to total forfeiture of the altcoins.
“We will be removing the wallets included in the list below on March 30, 2018. Once these wallets are removed, we will no longer be able to recover these coins. Users must withdraw their coins before March 30, 2018, in order to keep them,” the notice stated.
It’s a known fact that altcoins with combined low liquidity and low demand pose enormous challenges to cryptocurrency trading platforms. Specifically, these unpopular assets make it quite a herculean task for exchanges to sustain a balance in their order books.
Another feature of this situation, founded on a lack of liquidity, can lead to price manipulation, of which many exchanges are guilty.
In recent market research by an expert crypto trader named Sylvain Ribes, he used a method known as slippage (“a process of selling $50k worth of a given currency on an exchange to measure its impact on the price”) to find out which exchanges engage in market manipulation.
Ribes concluded that:
“A bit of wash trading and artificial volume inflation is to be expected in a thoroughly unregulated market. What I did not expect was the magnitude of the fraud. Many pairs, albeit boasting up to $5 million volumes, would cost you more than [ten percent] in slippage, should you want to liquidate a mere $50k in assets.”
Wash trading and price manipulation is a common phenomenon on essential trading platforms. On March 15, 2018, BTCManager reported on BitFinex’s move to improve trade surveillance with Irisium, a firm that provides highly efficient market surveillance and other analytical services.
The Fear of SEC
Although it’s not abnormal for an exchange to delist coins that are not doing so well, this latest action by Bittrex might be in a bid to avoid falling into the United States Securities and Exchange Commission’s (SEC) snare.
The SEC has warned all exchanges involved in the sales of tokens to delist the coins or get registered under the commission.
In the coming weeks, it is expected that other exchanges in the U.S will delist a lot of low liquidity altcoins which will further reduce the already crashing total market cap.
These are trying times indeed for crypto enthusiasts and investors. When will this raging storm finally come to an end?