"As an observer, I think Binance's listing process is a bit glitchy. They made an announcement and then started listing 4 hours later. That's the necessary time, but within 4 hours, the token price increased on decentralized exchanges (DEX), then investors 'dumped' on centralized exchanges (CEX)," Changpeng Zhao (CZ), founder of Binance, said on X.
Binance's Problem
DEX is often used by professional traders to find new projects before the listing announcement on CEX. Being listed on centralized exchanges is an important signal for investors to buy a large amount of tokens on decentralized exchanges. However, this is only a short-term transaction, right after the project is listed on CEX. This creates a lot of selling pressure, causing the token price to drop rapidly. CEX exchanges are famous for their high liquidity, accidentally becoming a place for speculators to "exit goods".
According to Cointelegraph , as of May 2024, more than 80% of tokens listed on Binance - a centralized exchange - lost value in the first 6 months after launch.
The Madness of the Market
CZ's comments come amid a flurry of activity on the newly listed Test (TST) project on Binance. Test was initially created as an experiment on the BNB Chain blockchain network. But investors saw it as a memecoin and kept pumping up its price.
Binance Founder Changpeng Zhao
Notably, the TST project was only mentioned for about a second in the BNB Chain tutorial video for the Four.Meme platform. The video also made it clear that the project was only intended for testing purposes. But then, speculators and influencers in China began promoting it and pushing the project's market capitalization up.
TST had a market capitalization of $489 million on February 9, then fell more than 50% to $192 million, according to data from CoinMarketCap. At 2 p.m. on February 12, each TST token was worth $0.16, down nearly 69% from its all-time high of $0.52.
The fact that a token was created for testing purposes but was pumped up by speculators, pushed up the price and "dumped" on CEX exchanges partly clearly describes the madness of the market and the loopholes of the exchanges.
Solution
CZ said his comments were made as an “outsider.” After serving time in prison and facing a US fine, the Binance founder is no longer running the company. He asserted that he “was not involved in the listing process” of Binance or any other CEX exchange.
According to this billionaire, to fix the loophole, centralized exchanges should also automate everything in listing a project. This is what decentralized exchanges are doing well and do not encounter the same error.
A day after CZ’s comments, Binance co-founder Yi He explained to Colin Wu the exchange’s listing criteria. The most important criterion is return on investment (ROI), which is calculated by comparing the average price on the first day with the quarterly performance on CEXs.
The second criterion is the ability to bring innovation to the community and the industry as a whole. Projects that can help investors become professional blockchain users in the future will be highly appreciated.
Finally, there is market attention to the project. “If a token has technological appeal and is sought after by the market, we will list it if we don’t want to lose market share,” Yi He said. These three criteria help the exchange tightly control listings, from memecoins to projects with long-term potential.
Previously, Binance caused controversy after a Vietnamese project was listed on the exchange. A year ago, the Ronin project of Sky Mavis (the parent company of the game Axie Infinity ) dropped 18% in price immediately after listing on Binance. Notably, a week before that, the project's token increased in price by 30%. This made many people suspect that Binance employees leaked information, helping speculators buy when it was cheap and sell when the price was high. Ron was under great pressure on liquidity, leading to a sharp drop in price after only one hour. Binance announced a reward of 5 million USD for anyone who found evidence of corruption by exchange employees.
In his latest update, Yi He said Binance operates under the supervision of two U.S. law enforcement agencies. Over the past two years, the internal investigation team has handled more than 120 cases, firing 60 employees. Most of the violators were unintentionally violating regulations such as not disclosing personal relationships when working with partners. Even if unintentional, these people were immediately terminated.
Yi He also revealed that the exchange has recovered more than $30 million in illegal funds. The company still has two lawsuits in progress with US law enforcement and regulators. Employees who violate the rules can be prosecuted criminally if the crime is serious. Those who have been fired will be blacklisted, not allowed to participate in any projects or funds related to the company.
Source: https://thanhnien.vn/cz-noi-quy-trinh-niem-yet-cua-binance-dang-gap-van-de-185250211155517939.htm
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