Understanding Token Delisting on Major Crypto Exchanges

Cryptocurrency exchange Binance has announced that it will delist spot and margin trading pairs for cryptocurrencies Waves (WAVES), OmiseGO (OMG), NEM (XEM), and Wrapped NXM (WNXM), effective June 17. The platform cited their “failure to meet its strict criteria” as the reason for removing these trading pairs. This Binance delisting decision is part of the exchange's ongoing efforts to ensure that all listed assets meet their standards.

Beginning June 19, Binance will no longer support deposits in these coins and may convert users' remaining funds into stablecoins. However, the exchange has stated that it does not guarantee the conversion of funds.

This article discusses the reasons why major exchanges are delisting tokens and provides guidance on how investors should respond in such situations. Moreover, we have a TradingView account where SimpleSwap’s analysts share trading scenarios every week (please note that they do not constitute any financial advice). Feel free to use it as a source for new trading ideas.

Why Tokens Get Delisted

There are two main types of delisting: voluntary and compulsory.

Voluntary Delisting

Voluntary delisting is carried out at the request of token developers, who ask the exchange to remove their token due to certain reasons. They usually provide an explanation and motivation for the listing revocation.

Compulsory Delisting

Compulsory delisting occurs much more frequently and is initiated by the exchange itself. This type of delisting occurs when a token no longer meets the conditions and requirements set by the exchange for listing.

In our previous article, we detailed why cryptocurrencies are abandoned. If we briefly list the reasons for compulsory delisting, we can highlight the following:

• Fraud and Security Issues

  If the developers of the project are fraudsters, the exchange removes the token to prevent damage to users. Also, delisting can occur due to discovered technical vulnerabilities in the network or smart contract.

• Technology Change

  For example, if a token is moved from one network to another.

• Low Liquidity and Trading Volume

  It is more convenient for exchanges to remove a token with low activity than to keep it on the list.

• Problems with Regulators

  If a token does not comply with the laws of the country where the exchange is located, it is delisted to avoid conflicts with regulators.

Consequences of Delisting on Token Values

If the crypto delisting is carried out by a major exchange, such as Binance, it may cause a decrease in confidence in the token on the part of buyers. If a token is removed from several major exchanges at once, its price may drop sharply due to collapsed liquidity.

Waves (WAVES) is the cryptocurrency of the Waves tier one multi-functional blockchain, launched back in 2016. According to Coinmarketcap, the WAVES exchange rate reacted to the news of delisting from Binance with a sharp 30% drop. 

The cryptocurrency OmiseGO (OMG), a token of the OMG Network project, which positions itself as a solution for scaling the Ethereum blockchain, fell in value by 27%.

The exchange rate of the cryptocurrency XEM fell by more than 30%. XEM is a token of the NEM (New Economy Movement) blockchain, a blockchain that uses a proprietary “proof of value” consensus mechanism.

In February, Binance announced the delisting of the anonymous cryptocurrency Monero, after which the token collapsed by 40%. However, two days later, the cryptocurrency recovered the fall.

How Often Do Exchanges Delist?

Cryptocurrency platforms often exclude various trading pairs from exchange lists. The process increases in intensity amid market turmoil like the collapse of FTX.

Typically, regulated platforms or exchanges that qualify for this status periodically review listed digital assets for compliance. In cases where non-compliance is found, they may remove the asset from the quotation list. This is a standard practice followed by companies like Binance, Coinbase and KuCoin.

Investor Strategies to Mitigate Risks

Usually, a token is not delisted by all trading platforms at the same time. As a rule, the first step is taken by one company, and the others follow it. 

At the same time, exchanges warn customers in advance about the impending delisting and give them time to withdraw assets to third-party wallets. Users are not deprived of this opportunity even after the close of trading, so they can transfer the cryptocurrency to other platforms and perform the planned operations. 

If the token is traded on only one major exchange, it is necessary to act quickly. In some situations, it is better to sell the assets before trading stops, as a trader may face the lack of an opportunity to exchange them or withdraw them to third-party addresses. You can see a list of crypto strategies that might help you mitigate risks, here.

Therefore, it is worth working only with trusted platforms that notify clients about such procedures in a timely manner. To minimize risks, it is better to make a portfolio of assets that are present in the quotation lists of several major exchanges at once. You can find a variety of crypto portfolios that our Analytics team gathered to tailor to different crypto objectives (the list is provided for informational purposes and does not constitute financial advice). Below each portfolio article you can find a widget that allows for calculating a crypto portfolio based on the amount that you’re willing to invest.

Conclusion

A cryptocurrency exchange may decide to delist an asset for a variety of reasons, including regulatory reasons. The process of excluding a token from the list of traded tokens may negatively affect its price and cause certain problems for holders. Therefore, it is worth keeping a close eye on the announcements of major platforms.

SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.