TL;DR: Giant cryptocurrency exchange Binance acquired popular price and analysis site CoinMarketCap (CMC), both companies announced in statements, confirming at least part of rumors involving a supposed $400 million deal. Under the disclosed terms, CMC will act independently though its founder will be stepping down. Let’s look at Binance’s trend toward centralization and what it might mean.
Binance and CoinMarketCap Confirm Exchange’s Acquisition
It’s among the greatest bugaboos of cryptocurrency: centralization. Classical economic theory insists monopolies cannot exist due to the nature of free markets. Incentives are such that another business will undercut any attempt in that direction. This isn’t to say centralization trends won’t happen, however, and empirically economists of the modern variety understand in bear markets especially mergers and acquisitions occur often out of necessity.
— CoinSpice (@CoinSpice) May 8, 2019
For crypto enthusiasts, then, the success of an exchange such as Binance should buoy spirits. Changpeng Zhao (CZ) and his company have shown the way. They embrace almost every project no matter how exotic, get high marks for user-experience, and involve themselves in the broader community — controversies to charities. Binance is something to cheer, a chance to examine best practices.
On the other side, the trend toward centralization and bigness is where things get a little trickier. Binance’s gobbling up of CMC, the leading price site, might be a little too close for comfort when enthusiasts consider the exchange’s reach and its innovations, such as having a token of its own listed on CMC. It’s all quite incestuous, comes most of the criticism leveled. The phenomenon is more important than Binance, but Binance serves as an interesting experiment to watch going forward.
“The core DNA of CoinMarketCap is strongly aligned with Binance’s ethics and culture,” CZ was quoted in both statements, “from its integrity to its value of freedom, transparency and user-focus. Our common vision will be strengthened by this acquisition to further growth and instill transparency in the industry. This will enable us to build on each other’s strengths, jointly serving as infrastructure providers of crypto.”
CMC executives, for their part, penned their reasonings and hopes for the merger in ways familiar to veteran readers of such fare: the founder is leaving to spend more time with family, the new head promises continued integrity, etc., etc., etc. Cheers to Mr. Chez and his crew for scoring such great terms — there’s nothing to dislike about someone cashing out after having worked so hard to bring quality service to the ecosystem.
There’s something gnawing at analysts who’ve been in the space for a while, however. As Binance grows and grows, and deservedly so, it does tend to swing its relative power around, flex its muscles when it deems necessary. It famously delisted a project as a result of the coin’s notorious bad actor, for example, and while many appreciated the sentiment many more openly worried about precedent. Binance is setting a lot of precedences.
Something to Watch Closely
Binance and its charismatic CEO have also demonstrated odd, panicky judgment at times (see above, embedded tweet), such as when they hoped for a rollback of the BTC chain after a costly hack. More recently, the exchange helped Justin Sun and TRON attempt a hostile takeover of STEEM by using Binance’s considerable leverage, another unsettling move.
The exchange has also towed a strange line about its offices and locations. At one point, CZ claimed Binance was so sleek that it operated out of coffee shops by digital nomads. In another breath, the company claimed to be based out of, at least in part, Malta. This, in context, becomes more worrisome when set against Binance’s on-going fued with crypto journalists over the issue of the company’s whereabouts and closures.
There are a myriad of other issues noticeable only because Binance is growing so large. Again, that’s a blessing and could be a curse. For a project to be viable, getting onto Binance now takes on even greater significance, as DigiByte found out to the tune of $300,000 plus 3%. And as Binance grows, its fragility within the ecosystem becomes a real liability, making the exchange a honeypot rife with enthusiasts’ personal information.
It’s important to not be too alarmist, to not just hate on Binance because it is kicking so much butt. Again, their success is a fantastic sign, and in bear markets companies with solid fundamentals streamline and build, taking over competitors and ever-availing themselves of perfect onramps to their products. None of that is bad necessarily. There is also plenty of competition at the moment, a wide variety of exchanges trying to better Binance, best it, and we’re all better as a result. Still, keep a close eye nevertheless.
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DYOR: CoinSpice is your home for just spicy crypto things. We’re not affiliated with any cryptocurrency project or token. Each published piece is intended for information purposes only, not investment advice and not in the hope of impacting speculative markets. There are plenty of trading sites and coin-specific advocacy journals out there, we’re neither. CoinSpice strives for rigorous accuracy in our reporting. Information presented here is contingent usually on a host of factors, and the ecosystem moves fast — prices change, projects change, and at warp speed. Do your own research.
DISCLOSURE: The author holds cryptocurrency as part of his financial portfolio, including BCH.