A review on the impact of Coinbase’s Listings and “Exploration” announcements on the markets of those assets included in the announcements.
- A Coinbase listing has historically shown, not surprisingly, to have a positive impact on listed assets’ prices immediately following the announcement.
- The uplift from a listing is more muted than some may perceive, with the average and median uplift ranging from roughly -1% to 14% against US Dollar, Bitcoin, and Ethereum benchmarks. Price trends seen with assets such as the recent OmiseGo listing are outliers.
- Coinbase’s ‘Exploration’ announcements tend to have less of a direct impact on the mentioned asset’s prices. The price movements surrounding these events are less significant and largely related to the general market regime at time of announcement. We compare these changes in a bearish, bullish, and flat market using past examples.
Does a Coinbase Listing Always Deliver Results?
With the recent rise in altcoin prices and volumes, it is as good a time as any to discuss a phenomenon that typically elicits a lot of trading activity: The Coinbase listing.
Exchanges with a significant amount of market share at times can be “king makers” for altcoins. The simple suggestion or rumor that you will be listed on a top exchange has the potential to turn a valueless crypto “bag” into a large profit. Binance, Bittrex, and Poloniex are exchanges known for listing the long tail of altcoins, but what about Coinbase?
With the industry consensus being that Coinbase is the largest ‘retail’ onramp, the impact of a Coinbase listing should hold some significance on assets that might make the cut. However, there is another big factor that influences the impact of the listing: market conditions.
In this piece, we explore three separate instances that Coinbase announced they would be exploring new assets for potential listing and analyze how the assets performed afterward. Additionally, we explore the market conditions at time of announcement, and how different market environments (bear vs. flat vs. bull) impact the listings.
Source: Coin Metrics Reference Rates
We will walk through an event analysis of two major parts of the altcoin listing cycle:
- The announcement that there is a possibility of a listing and
- The announcement that an asset is being listed with the listing following shortly after
For this analysis we are considering the Coinbase or Coinbase Pro listing, whichever is first, to be the Coinbase listing date. Additionally, we will focus on three sets of assets that were announced for exploration by Coinbase in these blog posts.
- Dec 7, 2018
- Aug 5, 2019
- June 10, 2020
Coinbase made an additional announcement on Sep 19, 2019. However, we exclude this set as a majority of these assets were not trading elsewhere either because the supply is locked, still in IOUs, or privately held.
The most complete examples to review are the effects from the Dec 7, 2018 and Aug 5, 2019 posts. We will also look at data leading up to and briefly following the June 10, 2020 post, however the full impact of listings from that post has not occurred as of the time of this writing.
We look at how assets related to these posts performed against BTC, ETH, XMR, ZEC and DOGE as benchmarks. The reason for using multiple assets is so that we can reduce any false findings related to an unrelated trend in the benchmark asset.
Furthermore, for consistency and simplicity we will look at the assets which we at Coin Metrics calculate Reference Rates for before and after the ‘event’ in question as these assets have met criteria that have allowed us to determine more accurate pricing, such as listings on reputable exchanges and volume that meets minimum thresholds. This helps us to remove additional noise from our analysis.
The Impact of the Possibility of Listing
December 2018 – Bear Market
On December 7, 2018, Coinbase announced the ‘exploration’ of 31 assets for potential listing. The below chart shows the median and mean performance for the mentioned group against different benchmarks.
Prior to that announcement, the assets were generally tumbling in price. It is important to put in the context of the asset class, with the 25 day prior mark being mid-November 2018. During this period, Bitcoin sold off from ~$6,350 to ~$3,200, the lowest range that we have seen since the 2017 peak. This is reflected in the following chart, which shows asset price change in USD.
This announcement date precedes this “bottom” by a few days. In the period following these assets saw rebounds in value and over the following 100 days appreciated generally 50% in price against Bitcoin. The histogram below displays how the appreciation changed over time, from a tightly distributed decline in the 10 days immediately following the post to a broader, more positive distribution over the following 100 days.
August 2019 – Flat, Choppy Market
The group of assets in the second ‘exploration’ blog post in August 2019 was a much smaller sample size than the first, with only eight assets.
The market environment had also changed significantly. In this period Bitcoin had just hit 2019 highs in July and was trading in a choppy range between $12k and $8k, trending down.
In the days immediately following the announcement, on average these assets saw a brief bump in price around 10%. In general these assets held up better against the other alts such as ZEC, XMR and DOGE and not so well against BTC, ETH or the US dollar. Again, below we have a histogram of the price appreciation over 10, 25 and 100 days with the distribution moving from a tight distribution around zero that widens over time.
June 2020 – Bull, ‘Melt-up’ Market
The most recent group, announced in June 2020, has the largest positive trend of any of the groups reviewed so far, with the mean and median price changes of the assets rising 20%-40% going into the announcement and continuing to appreciate roughly another 20% in the 10 days following.
This trend is largely due to broader risk-off in March due to the Covid-19 (81 days prior was the local minimum on March 13, 2020) and the subsequent swift recovery. This risk-on momentum may be contributing to the initial lift in prices. However, because we have not had as long of a period following the announcement to observe price action it is difficult to say whether this trend is temporary or not.
The Impact of the Coinbase Listing
The rumors about an asset potentially listing are one thing, but the actual listing announcement is an event with a 100% certainty. Let’s review the impact of the actual listing announcement on the listed asset’s prices the 10 days before and following the announcement. Again, we compare the asset’s price change in multiple assets, here using the US Dollar, BTC and ETH for a more holistic view.
The three charts above observe the listing trends from 16 listings on Coinbase from 2018, 2019 and 2020. 10 out of 16 (62.5%) appreciated against USD, all but 10 out of 17 (62.5%) against BTC, and 7 out of 16 (64%) against ETH. These high level results and relatively limited sample size would lead us to believe that an asset that is listed on Coinbase will likely appreciate over the following ten trading days. This is a very broad statement and the distribution of those results are investigated below.
Above is a histogram of the same data as the previous charts, with each color representing a different benchmark asset. This data is what should ultimately be considered when looking to make a short term trade around a listing announcement. This is especially important to view now due to the recency bias that many traders may have after watching the OMG listing last month, which appreciated by over 100% against all three benchmarks here in the 10 days following the listing announcement. That listing was an outlier. The mean and median values for appreciation against the benchmarks fall between -1% and +14%. This range is much more realistic. Traders looking for the 100% gain or ‘ten x’ following a listing may not have the odds in their favor.
Our analysis has found that the shorter-term impacts of the ‘exploration’ and listing announcements are subject to the broader trend of the asset class. This can be seen in the breakdown of events occurring in three distinct market environments: a bear market in late 2018, a flat, choppy market in summer 2019, and the current euphoric ‘melt-up’ market of Q2 2020. The short-term, 10 day, price changes tend to be temporarily skewed toward the broader market trend at the time of the event. Over time these distributions flatten out, with the 100 day price changes becoming more normally distributed over a broad range.