2018 March 26 - Volume.2 Issue.12

Read Full Issue

2018 March 26 - Volume.2 Issue.12

Read Full Issue

Kraken' the Key to the Next Coinbase Listing

While many parts are up for interpretation from Coinbase's Digital Asset Framework that lists the prerequisites a cryptocurrency requires to qualify for listing on the popular exchange, one measure can help hone down possibilities. Whether or not a cryptocurrency has a fiat trading pair on the market filters down possibilities remarkably. Can listings by cross-town exchange Kraken provide further insight? 


A correct outlook as to the next cryptocurrency that could get listed on Coinbase could bring speculators massive gains, as the regulatory conscientious exchange would give the newly added coin a bulls run. This has been very evident with Ripple whose price shoots up on every tiny little rumour of potential listing on the exchange.

Coinbase has had to deal with a myriad of criticism from the crypto community because of customer service issues, delays in implementing SegWit support, lack of transaction batching, and the abrupt listing of Bitcoin Cash, which resulted in a class-action lawsuit for insider trading.

But the digital currency exchange has been as transparent as a business can be with their Digital Asset Framework that lists, in 6 sections and 45 points, the criteria a coin must meet to qualify for listing on the exchange.

|| FIAT SHALL RULE

The irony is not lost on anyone that one criteria for a potential listing of a coin by the cryptocurrency exchange would require a fiat trading pair to exist on the market (section 4.2). This requirement markedly brings down the potential cryptocurrencies, for now atleast, as there remain few regulated exchanges with fiat trading pairs (see table).


1: Key Exchanges with Fiat/Crypto Trading Pairs1

wdt_ID Exchange HQ # of Coins with fiat
1 Upbit South Korea 125 35
2 Bithumb South Korea 12 12
3 Kraken USA 16 13
4 Bitstamp UK 5 5
5 Coinone South Korea 9 9

Notes: 1. Excludes exchanges with same cryptocurrencies as Coinbase and are within the top 20 exchanges in trading volume. 


10% of Exchanges Near 50% of Total Crypto Trading Volume...


Top 20 Exchanges Volume: Crypto Only vs. Exchange with Fiat Pairs


Number crunching shows that exchanges outside the top 20 account for less, each, than 0.3% of total global trading volume. And with only a handful of exchanges in the top 20 with fiat possibilities, coins outside of them would face poor liquidity.

|| SLIM PICKINS

Of the top exchanges who support fiat only 38 possible coins with a fiat/crypto trading pair exist, including the 4 on Coinbase. This represents a meagre 2% of all the coins that are currently traded on all cryptocurrency exchanges.

|| THE KOREAN DIVIDE

Coinbase makes a point as to where the cryptocurrency is available to trade, saying the asset must not be "limited to a single geographic region." This puts a bit of a question mark on cryptocurrencies traded on South Korean exchanges where regulators only allow its nationals to trade on the platforms.

The caveat could be a stopgap to reduce potential volatility should a region fall out of its love affair with a certain cryptocurrency. Cardanao, which impressively fluctuates within the top 5 coins by market cap is a prime example. A whopping 65% of global volume traded is on a single South Korean exchanges alone, albeit, with a fiat/crypto pair.

The prerequisite could also be aiming to mitigate the risks of potential regulatory issues that may arise in a single country. And not without reason. Earlier this year, South Korean regulators caused a market selloff with conflicting statements from various agencies about banning cryptocurrencies (Diar, 22 January).


Kraken Trading Distribution in US, Europe Almost Evenly Split

Notes: *7% Crypto/Crypto volume, under 1% CAD, JPY & GBP


Outside of South Korea, and UK based Bitstamp who offers Ripple as well as the other majors, Kraken is the only fiat exchange that has leaped into a larger offering, with an additional 12 coins – 9 of which have a fiat trading pair (see table 2).

And in terms of regional distribution of traded volume, Kraken has captured both major markets in the US and Europe, based on its fiat trading numbers (see chart above). The added benefit that Kraken could be setting a precedent as a regulated exchange on US soil.

2: Cryptocurrencies with Fiat Pair Available on Kraken

wdt_ID Crypto Exchanges Traded on Top 15* Trading Pairs Currencies
1 Dash 64 12 32 12
2 Ripple 61 14 32 16
3 Eth. Classic 50 14 19 8
4 EOS 45 9 27 7
5 Zcash 46 13 22 10
6 Monero 35 10 22 9
7 Stellar 26 9 25 7
8 Augur 25 6 12 5
9 Gnosis 12 6 8 3

Notes: *5 of the Top 20 Exchanges deal only with current Coinbase offerings. Coins also traded on Upbit (bar EOS, Gnosis) and Bithumb (bar Augur,Gnosis & Stellar) .


While the measures highlight the importance of a healthy global cryptocurrency market, the data is no more than a "yes or no" metric that filters down the possibilities as of date. The potential listings have many more requirements to fill, and not all fit the bill for a potential add on the exchange. But they do make for an interesting case, especially considering Coinbase's bigger picture plans (see story below).

|| PRIVACY HURDLES?

Dash, one of the oldest cryptocurrencies which celebrates top spot on the number of exchanges it can be traded on, has repositioned itself from the cryptocurrency for dark matter. Its crowning feature, the option to transact privately, alongside other privacy coins ZCash and Monero, could give Coinbase the jitters however, from fear of Anti-Money Laundering scrutiny by regulators.

Last week saw all three coins booted from Japanese exchange Coincheck following the biggest heist in crypto history that brought total crypto thefts to over an eye-watering $1.1Bn (Diar, 29 January).

Nonetheless, all three cryptocurrencies are widely available on regulated operations, including US based Kraken, which indicates that exchanges are able to place relevant compliance measures.

|| TO SETTLE, OR NOT TO SETTLE...

Only bested by the majors listed on Coinbase, Ripple pairs up with a whopping 16 currencies. A mark of success as a settlement focused coin. Ripple Labs has been winning over central banks to test their technology, and major money transfer businesses Western Union and Moneygram to test remittance settlement with their native cryptocurrency. Its clear that Ripple is open for business.

|| BUT....

A Coinbase requirement states that "the ownership stake retained by the team is a minority stake" (Section 6.2). Ripple, however, holds 61% of the XRP supply, albeit having placed 90% of their stash in an escrow account with a release schedule. Stellar is only slightly better in this regard were the developers hold 30% of the supply.

And if Digital Currency Group (DCG) CEO Barry Silbert has any clout – and he does –  Stellar would face an uphill battle to be listed with DCG being vested in both Ripple and Coinbase.


3: Major Investment Firms Backing of Select Coins & Companies

wdt_ID Token DCG Blockchain Pantera
1 Ripple + + +
3 Zcash + +
4 Eth. Classic +
5 EOS +
6 Augur +

Coinbase Section 5.1 - External stakeholders with experience in crypto companies.


|| YOU KNOW WHAT THEY SAY WHEN YOU ASSUME...

While many believed the original Ethereum chain, now represented by Ethereum Classic would wither away, the cryptocurrency found an audience backed by the protocols strict adherence to its original governance principles following the Ethereum fork as an answer to the DAO hack. And spearheading the growth initiative for the cryptocurrency is DCG's investment arm Grayscale, who are the sponsors of the Ethereum Classic Trust. Coinbase, however, may find concern with the Ethereum Foundations holding of 10% of the supply. And if that's not a concern, the 40-45% trading volume on exchange OKEx alone, might be.

|| THE INTERESTING CASE FOR AUGUR

Whether or not Augur, having launched an ICO, would pass the Howey Test is up for Coinbase to decipher. But the project, a forecasting platform, ticks a lot of boxes. It's an open-source project and has a proven track record in improving security (Section 2.1). Ethereum co-founder Vitalik Buterin, as well as Lightning Labs Elizabeth Stark sit on the board of advisors (Section 2.2). And the token also meets the economic incentives criteria set by Coinbase. "There are mechanisms which incentivize miners, validators, and other participants to exhibit 'good' behavior. Conversely, there are mechanisms which deter 'bad' behavior" (Section 6.1) - a statement that could have been pulled from Augur's White Paper and none would be the wiser.

Augur sits in the top 50 cryptocurrencies by market cap, and also has the most evenly distributed exchange volume - two factors Coinbase considers. And while not part of the assessment, quite notably, 75% of trading occurs on US based exchanges Kraken, Poloniex, Bittrex, and its South Korean extension, Upbit.

But this publication is not one for making guesses. We leave the predictions to the wisdom of the crowds - here.


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