Arthur Hayes, founder and former CEO of BitMEX, has warned cryptocurrency projects about the futility of paying significant listing fees to centralized exchanges (CEXs).
Hayes argues that the common belief that such payments will substantially increase token prices is a myth. He emphasizes that while these exchanges profit from hefty fees, many tokens must see the anticipated value boost after listing.
CEX listings fail to deliver value
Hayes has analyzed 103 projects that were listed on major centralized exchanges in 2024. His findings reveal a troubling trend: despite the millions spent on listing fees, most tokens experience a decline in value post-listing. He states, “Regardless of the exchange, tokens have not been pumped.” This observation suggests that the investment in listing fees does not translate into market success for the projects involved.
Many projects launch with inflated, fully diluted valuations (FDVs) while maintaining low circulating supplies, creating a scenario ripe for price drops after launch. Hayes points out that while Binance-listed tokens may perform slightly better than others, the overall trend remains downward. He asserts that many projects are overvalued from the outset, leading to inevitable market corrections.
The role of venture capitalists in market dynamics
According to Hayes, venture capitalists (VCs) contribute to the volatility in the crypto market. These investors often advocate for higher FDVs, prioritizing their financial interests over the long-term success of the projects. This strategy benefits VCs through management fees and inflated portfolio valuations, leaving projects vulnerable to price drops once they list on a CEX.
Hayes explains that VCs tend to postpone liquidity events, encouraging founders to conduct multiple private funding rounds at increasing FDVs. This tactic may enhance the appearance of VCs’ portfolios but ultimately harms the projects’ reputations and viability. When these tokens finally reach the exchange, they often crash, exposing the lack of underlying value. In Hayes’ words, “Most of you are just pure chumps! That’s why those drinks were free at the conference networking event… lolz.”
The high cost of Binance listings
Hayes does not absolve Binance from criticism, either. While acknowledging Binance CEO Changpeng Zhao’s operational acumen, he remains skeptical about the value of paying exorbitant fees for a listing on the platform. He highlights that Binance charges up to 8% of a project’s total token supply for listing, alongside mandatory deposits that reach as high as $5 million in BNB. Other CEXs typically charge listing fees ranging from $250,000 to $500,000.
Binance requires projects to allocate up to 8% of their token supply for marketing campaigns, including airdrops, further inflating the financial burden on projects seeking visibility. Hayes emphasizes that the costs associated with a Binance listing do not justify the potential benefits, urging projects to reconsider their strategies in a competitive and often unforgiving market.
Hayes’ insights reflect a growing skepticism towards the traditional model of CEX listings, suggesting that many crypto projects might be better served by exploring alternative paths to market visibility and sustainability.