Coinbase Gearing Up for Paradex Bulletin Board Expansion?
Last week saw Coinbase announce the exploration of an additional 31 tokens that could possibly end up being listed on the cryptocurrency exchange. It's unlikely by coincidence that half of the tokens have already been listed on Paradex, a decentralized exchange geared bulletin board, that was acquired by Coinbase earlier this year.
In the largest cryptocurrency exchange reveal yet, Coinbase broke away from its conservative nature and has announced the 'exploration' of an additional thirty-one cryptocurrencies, inclusive of the two previously mentioned this year, Stellar and Cardano (Diar, 3 December).
Only moments after the announcement, Coinbase added four of the mentioned cryptocurrencies to their Pro platform - a usual path the exchange takes before allowing retail investors to be able to purchase the newly added cryptocurrencies (see table).
The news is a departure for Coinbase from the similar path US-based exchanges have taken so far.
|| REGULATORY HURDLES MEET ENGINEERING PROWESS
When Coinbase purchased Decentralized Exchange Paradex in May, it was a purposeful strategic move to address regulatory uncertainty by shifting the trading mechanism from a matching engine to a Bulletin Board akin to Over-The-Counter equity markets allowing it to overcome US watchdog hurdles.
Either Coinbase has found clarity from the US Securities and Exchange Commission (SEC), as well as the Financial Industry Regulatory Authority (FINRA), or the exchange is nearing completion of complex engineering that would address the US and International markets differently.
How and if Coinbase's platform will interact with the Paradex engine remains unclear. But the exchange did note in their announcement, as they had done previously, that the "listing process may result in some of these assets being listed solely for customers to buy and sell, without the ability to send or receive using a local wallet."
|| KNOW-YOUR-CLIENT UNLESS?...
Beyond Paradex being potentially excluded by the SEC as a traditional exchange, the inability for tokens to be stored in local wallets could also indicate a needed work-around to Know-Your-Client (KYC) challenges that Decentralized Exchanges face as solutions addressing the regulatory requirement remain off-chain. But the exchange is aiming to provide such a solution having acquired Distributed Systems that's focusing on decentralized identity.
|| PRETTY BIG LEAP OF FAITH
The possible listings haven't come without scrutiny from the vocal cryptocurrency community who hold Coinbase accountable to a high standard - a role and image the exchange itself wishes to portray in terms of security, insurance and ease of use.
And for the time being, at the very least, the criticism as far as utility of the potential listings isn't without merit. For the most part, the tokens remain purely speculative with no utility as few projects have released a working product let alone demand for the coins.
|| ADD COINS YOU LOSE, DON'T ADD COINS YOU LOSE
While Coinbase's coffers would allow for the exchange to weather dwindling earnings from low trading volumes, as any business, it still needs to address revenues. The short-term gains from increased trading activity could come at the expensive price of Coinbase's own reputation should, when or if these projects fail to pick up any demand and burn unstudied retail investors.
|| WITH GREAT POWERS COMES GREAT RESPONSIBILITIES?
Ultimately, however, this was the opted route for a trading venue - not a token watchdog or investment advisor. Whether or not the expansion plan results in more peril than profits is a risk Coinbase seems willing to take on.
Coinbase / Paradex Cryptocurrency Overlaps
Coinbase Potential Additions with Paradex Overlaps
Coinbase Potential & Listed Paradex Tokens
Source: Coinbase, Paradex
Fiat-Backed Stablecoins Begin Finding On-Chain Traction
Stablecoins have found massive growth in adoption in the past several months as many began coming online. Concerns around Tether escalated last month which highlights a key-factor in users switching over to a different pegged cryptocurrency.
A whopping 1032% increase in on-chain transactions took place in November vs. September breaching the $2.3Bn mark at the close of last month.
Paxos, which has raised over $93Mn, has recorded over $1.8Bn on the Ethereum blockchain alone in the past three months - double that of Coinbase/Circle backed USDC.
To date, all four major stablecoins, USDC, TUSD, GUSD, and PAX, have breached the $5Bn in on-chain transactions within a short 3-month period.
|| DIFFERENT DOLLAR, DIFFERENT PURPOSE?
While TrueUSD was the only Dollar-pegged cryptocurrency to see a slight decline in the total on-chain transactions value, it did indeed double in the number of transactions vs October. TrueUSD has been able to find market share having began trading in early March.
November-2018 Transaction Count
Bitcoin Trading Volume Share Evening on Token Exchanges
Bitcoin trading volumes have taken a hit across major token exchanges over the course of 2018 (see chart). While Binance remains to have dominance over the space as a whole, their share of Bitcoin volumes have dropped from a peak of 47% to 32% in November. Volumes now are fairly shared across token exchanges in comparison to the start of the year.
But it is State-side exchanges that have suffered the biggest loss. Both Bittrex and Poloniex now account only for 2.7% of Bitcoin trading volumes across token exchanges - a massive 400% from their peak at the start of the year.
With the majority of tokens now having little liquidity, and hype all over, it's likely that global share of Bitcoin trading to continue in decline as the industry reboots from the bear market (Diar, 26 November).
% Share of BTC/USD Trading Volumes
Initial Coin Offerings Reaching Last Breaths
Initial Coin Offerings (ICO) are all but over with November seeing total raised funds at $65Mn. ICOs in 2018 have raised over $12.2Bn but have now petered out from regulatory backlash fears, as well as a slow-down in cryptocurrency markets with token prices plummeting leaving retail investors with a bitter taste.
|| COMEBACK HOPES?
In a speech last week the US Securities and Exchange Commission (SEC) Chairman Jay Clayton said that he believes that "ICOs can be effective ways for entrepreneurs and others to raise capital. However, the novel technological nature of an ICO does not change the fundamental point that, when a security is being offered, our securities laws must be followed."
It's unlikely the contentious fund raising mechanism, at least in its current unregulated format, to garner much interest moving forward with regulated tokenized securities platforms paving the way for a new realm of finding investor capital.
2018 Initial Coin Offerings Total Raised
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