Binance adds QuarkChain (QKC), but issues high risk warning

Posted: 5 June 2018 5:35 pm
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Buyer beware. That is, be more ware than usual.

Binance has long made a point of only trying to list good projects and rejecting most applicants. At the same time, it's widely rumoured that a couple of million dollars will let you buy a listing on the exchange.

It might have found a new type of balance in that endless balancing act today, with a stuttered listing of the controversial QuarkChain token. The listing was first announced yesterday, then a few hours later, Binance said it would be postponed due to insufficient deposits.

Then a few hours after that, it re-announced the listing again along with a buyer beware high-risk warning citing extremely imbalanced token distribution.

Buyer beware

"There is currently only 3.61% of the total supply of QKC tokens in circulation at the time of listing. The total supply is 10,000,000,000 QKC. This may cause extreme price volatility. Please exercise caution when trading in the QKC trading pairs," the Binance announcement reads (bold theirs).

Of that 3.61% of the total supply in circulation, the vast majority (2.4%) is on Binance.

In other words, 99% of the total coin supply is held in just four wallets, including Binance's. And two thirds of the entire circulating token supply is currently found on one exchange.

"This shows: 1. the crowd is powerful. 2. the crowd is powerful given the transparent nature of blockchain. 3. most of the usable circulating supply is already on Binance. 4. expect high volatility, ie, swings in BOTH ways," Binance CEO Changpeng "CZ" Zhao said on Twitter, in the context of a breakdown of the token supply.

Exercise caution

The theory goes that good projects attract more dedicated hodlers who expect the coin to be worth much more in the long run than right after the ICO. And bad projects attract pump and dumps, where all the ICO participants buy low, drum up some hype and then dump their coins as soon as possible after it hits the open market.

With the vast majority of the entire circulating supply migrating to Binance ahead of its listing, many are speculating that it's the latter. If that's the case, it means QKC prices will take a sharp dive after Binance trading begins and other than a few quick ups and downs, it will be plummeting. Assuming that's the case, QKC might never again reach its current prices.

Is that the case?

It might be. For starters, prices took an immense nosedive after CZ pointed out the extraordinarily skewed distribution and announced Binance trading. This is the exact opposite of what you'd typically expect from a real long-term project and might indicate someone dumping early on the other exchanges to beat the crowd.

It's currently running at over ten times the ICO price, so more cautious traders might be getting out while they can.

Second, almost the entire circulating supply is now on Binance even though trading has yet to open there. This is almost certainly in anticipation of finding higher prices on Binance. For the most part, people don't move their tokens to an exchange to HODL them there; they move them to sell them. It's reasonable to assume there's going to be a lot more selling than buying in the coming hours.

Third, the QuarkChain roadmap calls for gradual token releases in the coming months, with about 20% of the total supply being released by December 2018. In other words, there will be mass token sales in the coming months, with many times more tokens being sold than there are currently in circulation. That can't be good for the prices, and regardless of how much potential the project may or may not have, smart money might be to dump all one's holdings in the very near future. If someone really likes it, they might be able to buy back at a lower price.

Fourth, QuarkChain doesn't really do anything except maybe eventually offer a high throughput blockchain years down the line. It's not even scheduled to hit mainnet until 2019, so its claims can't even be tested until then. If nothing else, it's falling into the trap of trying to solve other coin's problems instead of actual problems, with the intention of discovering a real-world application somewhere down the line.

Even assuming everything is entirely above board, and that the inordinately skewed token supply currently on Binance along with everything else are nothing to worry about, its circulation will be multiplying quickly while its development proceeds slowly and towards an uncertain end. Its development timeline and laser focus on achieving high throughput, and nothing else, means there's not going to be any actual news to buoy prices even while supply grows.

On the other hand, the prospect of deliberate price manipulation down the line can't be discounted, and at this stage, might actually be one of the more compelling reasons to buy. Even if it can't stand on its own economic merits, a tall pair of crutches is just as good.

As CZ said, expect extreme volatility both down and up. And he's not talking about sudden tech breakthroughs.

Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VEN, XLM, BTC and NANO.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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