"As an observer, I think Binance's listing process is a bit flawed. They make the announcement and then start listing four hours later. That's the necessary timeframe, but within those four hours, the token price had already surged on decentralized exchanges (DEXs), and then investors dumped their holdings onto centralized exchanges (CEXs)," Changpeng Zhao (CZ), founder of Binance, told X.
Binance's problem
DEXs are often used by professional traders to find new projects before they are listed on CEXs. Being listed on a centralized exchange is a crucial signal for investors to buy large quantities of tokens on the decentralized exchange. However, this is only short-term trading, occurring as soon as the project goes on a CEX. This creates significant selling pressure, causing the token price to drop rapidly. CEXs, known for their high liquidity, inadvertently become a place for speculators to "dump" their holdings.
According to Cointelegraph , as of May 2024, more than 80% of tokens listed on Binance – a centralized exchange – had lost value within the first six months after launch.
The madness of the market
CZ's comments come amidst numerous irregularities surrounding the newly listed Test (TST) project on Binance. Initially, Test was created as a test on the BNB Chain blockchain network. However, investors viewed it as a memecoin and continuously inflated its price.
Binance founder Changpeng Zhao
Notably, the TST project was only mentioned for about a second in BNB Chain's tutorial video for the Four.Meme platform. The video also clearly stated that the project was for testing purposes only. However, after that, speculators and influential figures in China began promoting the project and driving up its market capitalization.
TST reached a market capitalization of $489 million on February 9th, before dropping by over 50% to $192 million, according to data from CoinMarketCap. At 2 PM on February 12th, each TST token was priced at $0.16, a nearly 69% decrease from its all-time high of $0.52.
The fact that a token created for experimental purposes was inflated, its price driven up, and then dumped on CEX exchanges by speculators clearly illustrates the madness of the market and the flaws in the exchanges.
Remedial measures
CZ stated that his comments were made as an "outsider." After serving time in prison and facing US sanctions, the Binance founder no longer runs 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 overcome the loophole, centralized exchanges should also automate everything involved in listing a project. This is something decentralized exchanges are doing well and not encountering similar errors.
A day after CZ's comment, Binance co-founder Yi He explained to Colin Wu the listing criteria of the exchange. Accordingly, the most important criterion is return on investment (ROI), calculated by averaging the price on the first day with the quarterly performance across CEXs.
The second criterion is the ability to bring innovation to the community and the entire industry. Projects that can help investors become professional blockchain users in the future will be highly valued.
Finally, there's the market's 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.
Binance previously faced controversy after a Vietnamese project was listed on the exchange. A year ago, Sky Mavis's Ronin project (the parent company of the game Axie Infinity ) dropped 18% immediately after listing on Binance. Notably, just a week earlier, the project's token had increased in price by 30%. This led many to suspect that Binance employees had leaked information, allowing speculators to buy low and sell high. Ronin faced significant liquidity pressure, resulting in a sharp price drop within an hour. Binance announced a $5 million reward for anyone who could find evidence of employee corruption.
In the latest update, Yi He stated that Binance operates under the supervision of two US law enforcement agencies. Over the past two years, the internal investigation team handled more than 120 cases, resulting in the dismissal of 60 employees. The majority of violators unintentionally violated regulations, such as failing to disclose their personal relationships when working with partners. Despite these unintentional violations, their contracts were immediately terminated.
Yi He also revealed that the exchange has recovered over $30 million in illegal funds. The company still has two ongoing lawsuits with US law enforcement and regulatory agencies. Employees who violate the rules may face criminal prosecution if the offense is serious. Those who have been dismissed will be blacklisted and prohibited from participating 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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