What is Delisting?
CoinGecko listed approximately 8,000 cryptocurrencies in 2021. However, as of February 2023, around 40% of them have been declared dead and delisted from exchanges.
What is Delisting?
There are many factors that influence a cryptocurrency exchange's decision to delist a crypto asset. These include:
- Low trading volume;
- Stagnation of the protocol;
- Unsatisfactory network performance or smart contract reliability;
- Lack of public outreach;
- Evidence of unethical or dishonest behavior by the project team;
- Refusal to comply with exchange requirements;
- Absence of a tangible effort by the crypto project towards the sustainable development of the blockchain ecosystem, the crypto industry, etc.
Once a cryptocurrency is delisted from an exchange, all trading operations on that exchange for that asset are terminated. However, it may continue to be traded and even thrive on other platforms.
Investors' rights in a cryptocurrency project, whose token is no longer traded on an exchange, are generally protected. Crypto holders are given a specific time frame to withdraw their funds, after which it is impossible to retrieve them. Therefore, it is important to carefully monitor the cryptocurrency exchange's statements regarding the delisting process.
When cryptocurrencies get the boot: delisting in action
Sometimes cryptocurrency delisting occurs for unjustified or unfair reasons. For example, if an exchange has a stake in a competing project, a cryptocurrency from the aforementioned could fall victim to a conflict of interest. Assets may be delisted due to unsubstantiated accusations or rumors, rather than proven wrongdoing. In 2023, regulatory positions have also become a common reason for delisting currencies.
One of the largest exchanges, Crypto.com, delisted USDT for Canadian users as an example. It is worth noting that Tether holds the leading position in the global stablecoin ranking by market capitalization. However, Crypto.com aims to obtain a Canadian license and must comply with the local Securities Commission instructions. As a result, all remaining USDT deposits on the exchange were converted to USDC. Holders of these deposits undoubtedly went through some unpleasant moments during the March madness. (Tether maintained its dollar peg).
Paxful's CEO, Ray Youssef, has decided to delist Ethereum from the platform for ideological reasons. He explained to customers that he opposes economic apartheid. The entrepreneur's goal is to see a world in which Bitcoin liberates billions of people held back by an unjust system, especially those living in the Global South. At some point, Yusuf realized Ethereum had hindered him. Specifically, the algorithm switch from PoW to PoS made the currency like a digital fiat. Additionally, the Paxful owner believes that Ethereum lacks decentralization - the project is controlled by a small group of people.
Therefore, before investing in a cryptocurrency that has been delisted from a certain exchange, it is critical to thoroughly study and understand the true reasons for the delisting. To reduce the risks of unjust exclusion, portfolio diversification can be achieved not only in terms of cryptocurrencies, but also in terms of crypto exchanges.
