Author: shaqima; Source: Author’s Twitter | @Daji_357
Recently, there have been different opinions on this topic. I have conducted a comprehensive analysis from the perspective of the overall flow of funds in the capital market and the business model of exchanges and VC. I will share my thoughts here in a simple and understandable way, using logical explanations and examples.
The content can be divided into several major categories:
1. The current distribution of market funds and population.
2. The operational logic of VC tokens and exchanges.
3. Why exchanges don’t like your project.
4. How to break through in the future? Let’s learn from past experiences.
To understand why exchanges don’t like your project, we first need to understand the operating model of exchanges and their role in the crypto ecosystem (capital market).
I.
Distribution of Market Funds and Population
The capital market can be broadly divided into primary and secondary categories. If we further divide it, we will see various ecosystems, sectors, and different forms of fund products (NFTs, tokens, inscriptions, runes, etc.).
The population can be broadly divided into two categories: domestic and overseas. Since the implementation of policies, there are limited options for domestic investors when it comes to exchanges. Therefore, for domestic investors, exchanges are not begging for their participation, but rather adopting an attitude of “if you don’t come, you have nowhere else to go.” Moreover, with the wealth effect, people will naturally come.
Of course, there is not just one exchange, but each exchange has found its unique competitive advantage in the market. Some focus on security, some focus on building and promoting new ecosystems, some choose to survive with assets that top exchanges don’t pay attention to, and some even compete for the primary market.
Therefore, from the perspective of exchanges, regardless of the form of assets, projects can be classified as:
C: Regular assets in the primary market (uncertain risks, need research, understanding, and decision-making).
B: Good assets in the primary market (with potential but still have risks, analyze their benefits and make decisions).
A: Excellent assets in the primary market (backed by excellent endorsements, lower risks, and definite returns).
Therefore, A-class assets are in high demand, B-class assets are selected by top exchanges, and C-class assets are generally not considered and can be dealt with in the primary market.
Let’s use an example to summarize:
Here, A, B, and C are like students, and exchanges are divided into top universities, regular universities, and colleges.
Excellent students bring benefits to the university and are naturally welcomed by all. If you are not excellent but have connections and can bring value to the university, you are still welcome. Even if your grades are average, as long as you can afford the tuition, we can accept you because universities also need to make money. But the spots are limited, so don’t be discouraged, there are other universities that welcome you more. If you are a poor student with disruptive behavior, you might as well go to a college. There will always be schools that are not afraid of risks and want to make money from you. This is how the threshold is formed. So, project teams also have to go through an examination.
Of course, these are the overt rules. What about the covert operations?
If you have an “overseas identity”, even if your grades and strength are average, if you come to our university, you can make a name for yourself in the overseas market. Naturally, you will be welcomed.
Therefore, in the current capital market, projects mainly led by domestic investors need to rely on their own strength. If they don’t want to rely on their strength, they need to rely on their backgrounds and connections. After all, the domestic market is saturated, and exchanges are not afraid of not being chosen by you because you have nowhere else to go. For exchanges, the overseas market is the main target to increase revenue. Accepting projects with high popularity overseas can bring in overseas users, and once they stay, exchanges can continue to expand their revenue.
So, the relationship between population and funds is clear now. If we go deeper, when a new narrative emerges, we should first look at the proportion of different populations. If the majority are overseas users, we will give them priority and lower the threshold. Even if they don’t bring profits at first, as long as they can bring people, we can make profits from them in the future. If domestic users are the majority, we will look at their capabilities and strengths. If the narrative is innovative enough, we will praise it, but conditions are still necessary. When your ecosystem becomes large enough and profits are considerable, then we can talk about “cutting” deals.
Therefore, under the condition of having no fear of supply shortage, everyone hopes for a shortage of quality projects.
Now that we have discussed the external environment, let’s look at the internal structure.
II.
VC Token and Exchange Operational Logic
To make it easy to understand, let’s not talk about projects with a golden key from the beginning. Let’s start with ordinary projects.
Once a narrative is constructed, the next step is to survive in the market, which requires traffic. In the early stages when there is no popularity, data is needed to support one’s “face.” Therefore, in the initial stage, everyone starts from the same starting point.
When you achieve some success, strong individuals will extend an olive branch to you. If you are not strong enough, it will be difficult to go it alone. You need to join forces.
At this time, your basic traffic will start to expand through these olive branches.
When the traffic expands to an ideal stage, you qualify for admission to top universities.
Then, it’s time to talk about returns because no one will support you if you don’t have money.
From initially owning 100% to sharing it with the olive branches and top universities, you suddenly realize that you don’t have enough to give to the friends who supported you when you had no reputation!
What do you do then? The witch is a good thing.
“The recent so-called witch events in the crypto field are really a joke if they can be tolerated.”
Therefore, in the above logic:
The project team plays the role of technical ideation and implementation (although there are cases where projects make money solely based on ideas, that belongs to ancient times).
VC plays the role of the matchmaker. They must help you build momentum, provide you with funding when you need it, and use their network to help you gain exposure.
Exchanges play the role of traffic amplifiers (liquidity). Projects earn profits from their own entrepreneurship through technology and concepts. VCs earn low-cost tokens through their network and resources. Exchanges obtain low-cost tokens through their traffic.
After distributing the tokens, the next step is to sell them better (let’s not delve into market makers here, the logic is the same).
Now that we have discussed VC, let’s look at exchanges:
Exchanges are the pioneers in the industry. They have built a convenient trading environment through technology, without the complexity of the primary market. They are perceived to have reduced risks.
Once the technology is in place, they need people. In the early stages of survival, they need various project teams to bring in people and conduct subsidy activities to attract and retain users, making their platforms popular.
One day, they realize that everyone in the village is playing in their platform, and there are no other platforms within hundreds of miles. Naturally, they don’t need to promote themselves too much.
The next step is to think about how to attract visitors from further away.
In essence, everyone is enclosing their own pool within the market. When wings are full, they naturally become protective. In other words, how can your own crops be taken by others?
III.
Why Exchanges Don’t Like Your Project?
It is often necessary to abandon the idea that one’s own child is always good. Many times, most projects have fulfilled the requirement of traffic, but not the requirement of returns.
As the saying goes, “A teacher is well-known.” Exchanges need a good reputation to accept your project.
Let’s examine a project from the perspective of an exchange:
1. Is the traffic large enough? If your traffic is what I want, it’s easy to talk. If the traffic is small, then we need to consider other factors.
2. Can you bring profits? Trading volume is the ultimate choice for exchanges, but it’s reserved for projects with high traffic. Direct profits are the most real. If exchanges don’t see money, why would they provide traffic in exchange for liquidity? If you take the money and leave, the exchange is left with nothing.
Therefore, chips or money are what matters.
“Without money, how can we eliminate bandits?”
Therefore, even if a project makes a big fuss, exchanges can provide free support to boost your dreams. Why would they spend their own money to support your dreams?
Ultimately, it all comes down to interests. Overt rules are often used to manipulate, while covert rules are used to get things done.
You may think that the child you have chosen meets all the requirements, but in reality, it’s just a big dream. Moreover, it’s important to objectively evaluate the advantages of a project. Just because you see a foreigner doesn’t mean they are all the same. That’s self-deception.
IV.
How to Break Through in the Future? Let’s Learn from Past Experiences
The market is the product of buying and selling behavior, and exchanges simply simplify the path of this behavior and take a share of the pie. When the population is large enough, the profits will naturally be greater. But the market is not an infinite cake, so exchanges cannot monopolize the entire market. This is the norm.
When things develop to a certain stage, they will always face the challenges of the current stage.
The reasons behind Binance’s current approach are not of concern to me, but it is true that Binance has encountered bottlenecks.
Exchanges cannot simultaneously achieve innovation, profitability, and security.
In the current difficult situation, even Binance cannot completely monopolize the market. It is a balancing act.
On one hand, there are risks and on the other hand, there is the profit game. There is also the competition for traffic. Trade-offs must be made.
From the current perspective, compliance and security are likely to be Binance’s top priorities, which means losing vitality and innovation.
Emerging projects like MEME focus on fairness and decentralization, but it also means one thing: it disrupts the existing ecosystem food chain.
This chain cannot operate in the same way as before. It requires innovation.
This is not the first time this has happened. In 2021, BYAC emerged as a new NFT product, and exchanges played a role in promoting it in the first half and following it in the second half.
Therefore, in this emerging market, other trading scenes such as Opensea have emerged.
The rules of the market cannot be completely controlled by individual entities.
Therefore, in the current stage, whether it’s pumps or Uniswap, these platforms play a significant role in the new environment.
There will be more emerging assets bypassing these so-called leading platforms to shine. When they have enough traffic, token assets will return to these platforms to jointly promote the entire ecosystem.
Binance is no longer a small boat but a stable giant ship. However, a giant ship does not deprive a small boat of its value.
Therefore, in the current stage, MEME and other emerging phenomena provide opportunities for more small boats.
This opportunity will bring more giant ships. In the end, even if the MEME track takes away the role of conventional VC tokens, it doesn’t mean that it won’t have its own exchanges.
Everyone has different standards for excellence, and in a market with thousands of faces, when the demand is huge, more opportunities will arise.
NFTs, pumps, Brc20, Rune will not be rejected just because Binance refuses them. They will continue to grow.
Exchanges are just passers-by in the grand tide of history. Binance has achieved great feats in a few years, but it also means that there will be successors.
The current problem is a dilemma, but it is also an opportunity for exchanges and teams with ideas.
The downfall of any giant ship is a heavy blow to the industry, and everyone has to bear the consequences. There is no need to destroy it; it can be said that as it upgrades and develops, many people are no longer its target audience.
But that doesn’t mean the market no longer exists.
Binance still has core competitiveness when it comes to large capital outflows and security.
When it can no longer meet everyone’s expectations of “advancing the industry,” new contenders will naturally emerge.
Sometimes the catfish effect can stimulate industry development.
From an ecological perspective, Binance cannot stop the cycle of operation. From the perspective of individual investors, sticking to the same trading logic as the exchange can still achieve desired returns.
We look forward to the emergence of a bright solution to the current dilemma.
