Analysis of Binance’s new coin investment returns: What are the reasons behind the poor performance?

Analyzing Binance's underperforming coin investments

According to Binance’s listing announcement, during the 13-month period from April 2022 to June 2023, Binance added a total of 20 new tokens for spot trading, including 6 new coins and 14 old ones. The average return on investment for these 20 tokens since their listing is -22.3%, significantly lower than the average return of 7.9% for BTC during the same period. Cryptocurrency researcher 0xLoki analyzed the reasons for this issue and found that the overhype of the listing effect and the exhaustion of growth potential are the main reasons for the poor performance of newly listed tokens on Binance.

The average holding return of the 20 projects to date is -22.3%, significantly underperforming BTC’s average return of 7.9%; only ID, RPL, and LDO have returns that exceed BTC during the same period, while the remaining 17 have underperformed BTC over the same period, with RPL having the highest return rate above BTC (leading by 26%) and OSMO having the lowest (falling behind by 96.6%). In addition, considering the effect of listing on Binance, we use T+7 as the benchmark date for calculation, and the average return rate of the 20 projects is -11.3%, still lagging behind BTC’s average return rate (9.4%).

First of all, one thing we can be certain of is that the 14 old coins listed on Binance are fundamentally sound and have been market-tested, objectively speaking, they do belong to “high-quality coins”. Therefore, the reasons for this situation may be three-fold: the timing of listing was too late, Binance’s liquidity advantage became a dumping ground, and the “listing effect” overdrew the growth space. Based on this, we selected 14 old coins and calculated the return rate from the day Binance was listed to 7 days before the listing. It can be seen that Binance’s listing effect is very obvious, so the listing effect overdrawing the growth space is the main reason for the poor performance of Binance’s newly listed tokens.

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From Binance’s perspective, according to a reasonable process, they have selected tokens with good fundamentals for listing. If the listing decision occurred before the listing or when Binance made the listing decision, buying the token, even extending the market cycle, would result in returns higher than the market average. However, from the user’s perspective, the reason for this problem is the “listing effect”, where a 35% increase erodes the token’s original potential for growth, which is a form of irrational or excessive investment.

Reference: https://mirror.xyz/lokiz.eth/mNjsF0vyxkpQwxwC88Yo61e-U1DTbw0ky4Gr51WhKto

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