Within five days of launch on Coinbase, new tokens are experiencing an average 91% price increase.
Coinbase effect is correct
Crypto analytics provider Messari has prepared a report concluding that the famous “Coinbase effect”, expressed in the popular belief that new token lists on Coinbase tend to outperform launches on other exchanges, is true.
However, the effect is far from consistent, and after controlling for outliers, it is not as great as most people think.
Messari compared the performance of 28 new Coinbase lists over five days to 22 Binance lists, 19 FTX lists, 19 Gemini lists, 14 OKEx lists, and 11 Kraken lists over the same period.
While the research found that the listings on Coinbase had the highest average return at 91%, the effect was far from consistent. 28 tokens performed anywhere from a loss of 32% to a gain of 645% after five days. In contrast, new tokens on other exchanges ranged from a loss of about 25% to a gain of 60%, with the next best average earning of around 20%.
However, the researchers noted that external factors provided excessive returns for several tokens shortly after being listed on Coinbase, with Distict0x increasing by 645% and Civic by 493%.
While “checking outliers,” Messari found that Coinbase’s new listings outperformed other exchanges, with returns ranging from 0% to 66%, with a total average of 29%.
In the adjusted data, OKEx ranked second on average, with tokens up about 20%, followed by Kraken with 15%, FTX with 12%, Binance with approximately 0% and Gemini with a slight loss.
The Coinbase effect may be related to the popularity of the exchange and its strong brand name, or it may be a byproduct of US crypto regulations that discourage many exchanges and issuers from providing services to United States residents and limit retail investors’ ability to access many altcoins.
Messari describes Coinbase as “the largest retail server for crypto” and suggests that the strong average performance of newly listed token on the exchange can be attributed to US retail investors competing for exposure to previously inaccessible markets.
However, the report noted: “The Coinbase listing has the potential to have a positive impact on asset returns. However, it does not affect all tokens in the same way. ”