The Market Dynamics of Exchange Listings

Key Insights

• Listing-to-date performance for futures products has been universally poor for most of 2024.
• Initial listing rallies are usually front-run on decentralized exchanges. Trading going live usually marks a local top for an asset, with a median performance of -10-20% in the first month.
• Funding rates are usually highly negative in the first ten days of trading; listings with the highest funding rates and open interest increase in the first five days of trading tended to perform better.
• Listings completely change the return distribution of an asset. Assets’ daily returns, volatilities, skewness, and kurtosis all fall significantly post-listing. Listings increase pricing efficiency and decrease the occurrence of extreme outcomes, particularly outsized right-tailed moves.
• Centralized exchanges have been going out on the risk curve with new listings, leading to larger opening rallies. They may compete more aggressively in a new regulatory environment, which could change sentiment around new CEX listings.

In 2024, the median Binance and Bybit futures listings had -9% and -22% listing-to-date returns respectively. Complaints about high listing valuations, large listing fees for projects, and souring sentiment about VC-funded protocol launches have put centralized exchanges (CEXs) under fire. While in the early stages of crypto markets CEXs were the undisputed gatekeepers of token listings, the landscape has changed. With the rise of DEXs like Hyperliquid and Raydium, apps like Moonshot and Pump.fun, and the general improvement of onchain trading UX, it’s no surprise that DEX share of spot volumes has risen to almost 14%. Why the fall from grace, and are there any inklings of a comeback for centralized exchanges?