3 Bullet Points to Explain the Coinbase Effect (The Merkle)
Explaining all of the different phenomena in the cryptocurrency world is not all that easy. Some of these ëvents”are made up in people’s minds, whereas others seem slightly more tangible. The Coinbase Effect, for example, is something many enthusiasts tend to discard. Even so, it is something that tends to happen every so often, and will potentially continue to happen for quite some time to come.
What is the Coinbase Effect?
To a lot of cryptocurrency users, Coinbase is the main exchange to get a token, asset, or currency listed on. The company has been one of the gatekeepers of the industry to date, and it seems their international process is still growing as of right now. As such, any new listing on this platform tends to result in a major increase for that particular currency, asset, or token. This event is known as the Coinbase Effect, a trend which has struck several times over the past few years.
While it’s not uncommon for cryptocurrency prices to soar to new heights after getting listed on a bigger exchange, this particular trend is primarily apparent on Coinbase and Binance. As such, one can safely state the Binance Effect exists as well, although it seems to be getting less attention than Coinbase these days, for some reason. That is primarily because Coinbase is far more selective in terms of adding more currencies, tokens, and assets, whereas Binance has a big lead in terms of quantity.
The Precedents to Date
There are quite a few individual cases as to when the Coinbase Effect became rather tangible. The first “signs” appeared in 2017 when the prices of both Litecoin and Bitcoin Cash soared to new highs shortly after getting listed on this prominent trading platform. Although both markets have seen their fair share of ups and downs ever since, it would appear the effect triggered by this exchange sparked some excitement for a while.
One of the more obvious examples of the Coinbase impact on cryptocurrency prices comes in the form of Chainlink. While it remains unclear why this particular altcoin was added to the platform in the first place, the Coinbase Effect ensured its price briefly doubled. This sparked numerous debates on Reddit and social media, although it appears the price is returning to more normal levels at this time. That is only normal, primarily because Bitcoin is still under a lot of bearish pressure.
It Won’t Always Work
As prominent as the impact of Coinbase listing on cryptocurrency prices might appear to be, it is not a complete guarantee for success either. Some of the recent listings – including XRP, Basic Attention Token, and ZCash – did not see any major upward price momentum. In fact, all three markets saw a big dip first and foremost. They were added during the bearish year of 2018, thus that might have influenced the overall sentiment toward these market son Coinbase.
The bigger question is whether or not the Coinbase Effect will remain a thing for much longer. When there were under 50 different cryptocurrencies, an exchange listing was considered to be a major deal. In 2019, however, there are thousands of altcoins, assets, tokens, and currencies to choose from. As such, one would expect the excitement regarding a Coinbase listing to ebb away rather quickly, although this has not happened as of yet. How this situation will look in a few months or years, remains to be determined.
Disclaimer: This is not trading or investment advice. The above article is for entertainment and education purposes only. Please do your own research before purchasing or investing into any cryptocurrency or digital currency.
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