Can the wealth effect of Binance Launchpad last?

For a long time, new stock subscription has been a high-winning investment method in the investment market and has been favored by various funds. From US stocks to Hong Kong stocks, new stock subscription has also been recognized by investors and is called "risk-free return" by some investors. Binance brought this "IPO" model of new stock subscription to the cryptocurrency field, and combined with the exchange's own situation, the "Launchpad" IEO model was born.

Since its launch, Binance Launchpad has become the sector that is most likely to generate potential projects with 100x or even 1,000x returns. As of September this year, 31 cryptocurrency projects have been launched on the Launchpad sector, and "grasping Launchpad" has gradually become a guide for users. After all, following smart money has always been a good strategy for the investment community to make profits. Who can be smarter than the largest cryptocurrency exchange? The IEO model has also become the most popular way for users to invest in new products with its low risk and low participation threshold.

With the advent of the bear market, in the face of an increasingly depleted market, the Launchpad model is becoming a new focus for exchanges to compete for users with its stable rate of return. Major exchanges have launched their own Launchpad products one after another, all wanting to get a piece of the pie. Binance's LPD products have always been far ahead with high-quality projects and stable wealth-creating effects. So what strategic intentions are behind its wealth effect that cannot be ignored? ChainCatcher will explore the intentions and difficulties behind the Binance Launchpad wealth effect in this round of bear market, as well as the optimization and improvement of future systems.

Mechanism characteristics and strategic intentions

As we all know, IEO is the abbreviation of Initial Exchange Offerings, which refers to the behavior of the exchange as the issuer, directly issuing tokens to the users of the exchange and helping the project party to raise funds directly. Unlike the ICO model, IEO skips the step of "public offering" to the public in advance and directly puts the asset shares on the secondary market for trading.

As Binance's exclusive token issuance platform, Binance Launchpad has always provided Binance users with priority subscription rights for high-quality projects to support the ecosystem of the cryptocurrency industry. Users need to hold a certain amount of BNB to participate in the new coin subscription. The final distribution of new coins depends on the ratio of the amount of BNB invested by the user to the total amount of BNB invested by all participating users. Each user's token allocation has a hard cap to ensure fair distribution of Launchpad project tokens among all participants.

However, Binance's intention in launching Launchpad is by no means limited to leveraging its own liquidity advantages to provide a convenient platform and market for high-quality new projects and achieve mutual benefit and win-win results, or simply focusing on user experience and wanting to return profits to users. Instead, the more intention is the far-reaching strategy behind it to expand its share of the crypto industry.

1. Achieve user growth

"The product itself creates value, user growth delivers value, and the ultimate goal is to complete value conversion" is the traditional idea of ​​product growth, and Binance has injected this idea into the Launchpad product. Launchpad creates value for Binance users with its "guaranteed profit without loss" wealth effect, which has also become an important factor in attracting users. As more and more investors begin to notice Launchpad and are willing to try it, the stable income of Launchpad has also made these users taste the sweetness.

As the wealth effect of Launchpad began to circulate and expand among investors, external crypto users naturally chose to invest in Binance with liquidity. Launchpad also completed value conversion while attracting external liquidity, and gradually began to become a tool for increasing platform users. In addition, while increasing the platform's trading volume, the Launchpad product also increased Binance's market share and consolidated its position as the world's leading digital asset exchange.

2. Maintaining BNB price

From ICO to IEO, exchanges are trying to find a new balance, that is, "platform currency". Inspired by the IPO of US stocks, Binance uses platform currency to balance the relationship between project parties and investors, and cleverly combines the platform currency "BNB" with the IEO model. Users only need to hold a certain amount of BNB to participate in the subscription of LPD projects, and the invested funds (the amount of BNB) are linked to the allocation of subscription tokens. Such a mechanism has greatly mobilized the market purchasing power of BNB, and when the wealth effect of the LPD project is formed, a large amount of external liquidity will be introduced into the BNB market.

Of course, we can also regard the LPD project as another empowerment of BNB. Whenever LPD is launched, it will always cause fluctuations in the BNB market, and most holders value the long-term holding income of BNB. According to data previously disclosed by CAPITALISMLAB (from 21 to April this year), if the token is sold on the first day, the total return rate of BNB is 36%, and the annualized rate is 14%, which is even higher than the income of ETH Staking in the same period. This also makes BNB the cryptocurrency with the most long-term investment value in the minds of investors after BTC and ETH.

 Data source: capitalismlab

This is even more true in a bear market. Even though the market value of cryptocurrencies has dropped to a historical low, according to Coingecko data, BNB's market value currently ranks fourth, second only to USDT. Among them, Launchpad's role in stabilizing BNB cannot be underestimated.

 Data source: CoinGecko

In summary, supported by Binance's "head" influence, Launchpad has attracted a large number of domestic and foreign investors to participate. Investors not only hold BNB income but also have the right to participate in IEO, which greatly increases the yield of BNB while maintaining the stability of the BNB market. Launchpad is like a moat for the BNB market in a bear market, stabilizing the price of the currency while continuously mobilizing liquidity for it.

3. Increase the voice of coin listing

The birth of Launchpad is a key step for Binance to revitalize its platform tokens, but it also reflects its ambition to gain the right to speak on tokens. From SFP to GMT to HOOK, Binance LPD products have lived up to expectations every time they are launched. By promoting high-quality projects, Launchpad has established a good reputation among users and project owners for "guaranteed profits without losses", and has also given people trust and attention to Binance Launchpad.

"Listing on Binance" has gradually become a belief and "pump warning" for every holder. Driven by the profit-seeking mentality, more and more investors have begun to believe in Binance, and Binance has also become the final destination of major projects. The rich liquidity advantages, large user base and enthusiastic market response have all increased Binance's voice and brand influence in listing coins, and the emergence of Launchpad has become a home for various new projects.

4. Cultivate user loyalty

In fact, with the development in recent years, Binance has achieved a complete lead in terms of market share, user growth, and the right to list coins. Due to regulatory factors, the current focus of Binance's development strategy has gradually shifted from competing for market share to cultivating user loyalty.

Since its inception, Launchpad has become one of Binance's main ways to share and give back platform dividends to users by providing high-quality projects. While meeting the interests of users, it also attracts users' attention and recognition, thereby increasing users' recognition and loyalty to the exchange. Binance interacts the stable income of Launchpad with the long-term holding income of BNB. While increasing the income source of BNB holders, it also effectively improves the platform's user stickiness and cultivates long-term user loyalty.

In addition, the emergence of Launchpad has also built a more complete digital asset ecosystem for Binance: by introducing high-quality projects through Launchpad, new users are attracted to feed back to old users, and Binance's product suite provides users with more investment opportunities and channels for project participation, thereby continuously expanding the ecosystem, retaining and converting the attracted users well, and also retaining more old users.

Where is the Launchpad Wealth Effect Going?

According to ChainCatcher data, among the 18 IEOs conducted since 2021, the average first-day increase was 1445%, and the average maximum increase was 50.24%. Among them, GMT also ranked first with the highest increase of 41686%. GMT can also be said to be the most successful project in the history of Launchpad.

 Note: The data is based on USDT trading pairs. The first-day increase is calculated based on the UTC+0 closing price. The maximum increase does not include the highest price caused by the violent fluctuation within one hour of listing.

From the above table, we can easily see that Launchpad has its own shining projects in each stage, from wallets to fan tokens, to decentralized domain names and education. However, as the market goes down, trading volume shrinks, and the liquidity crisis spreads, Launchpad products are also facing a challenge. Since reaching the "benefit myth" of GMT, the highest historical increase has declined slightly. Although the overall rate of return is far higher than the projects before GMT, it seems difficult to reach the height of GMT before.

1. “Uncertainty” of project quality

In fact, since the launch of Launchpad, Zhao Changpeng has always emphasized that "the core of the IEO model is to find good projects, and the original intention of Launchpad is to help entrepreneurs and help the industry develop." However, in the development of Launchpad, it is not difficult to see that from club fan tokens to the "Move to Earn" Web3 application, although they were all new LPD projects at the time, their market performance was still uneven.

Putting aside the so-called "psychological account" factor (projects with low starting prices are more likely to be favored by investors), the low starting price generally leads to higher increases, which may be related to the quality of the project itself. From HOOK, the "girlfriend gate", to EDU, the "education trend", there have always been a few voices in the market about Binance's "currency preference", and some users have also begun to question the so-called new listing criteria of Launchpad, "what are the standards?"

However, according to CapitalismLab research, the three tokens launched since HOOK have all been at an upper-middle level in all indicators. The median first-day increase of 24.4 times is 1.9 times the historical median, and the historical maximum increase is 1.4 times the historical median. The first-day return rate of BNB is 1.5 times, and the historical maximum return rate of BNB is 1.3 times. In other words, these projects in the bear market are actually more profitable than most projects in the bull market.

Looking at the entire market, the so-called "Bestie Gate" and other coin listing disputes are mostly caused by the bear market environment, which has led to the loss of wealth in the overall market and the decline in the wealth effect of Launchpad products. The various disputes among investors are also the "inevitable product" of the bear market. As He Yi publicly responded before, Binance does not have "rat warehouses", "relative coins", and so-called "bestie coins". Binance still cares about the wealth effect, and its current "performance is still the best."

"Rumors stop at the wise." As far as the market itself is concerned, how to control the overall quality of coin listings from the source of the project, adhere to Binance's concept of screening "good projects", and create more positive value for users are still the directions that Binance Launchpad needs to think about in order to maintain the wealth effect in a bear market.

2. The "speculation" mentality is amplified in the context of a bear market

As Launchpad products are launched one after another, the way they increase has begun to show signs of growth, and careful investors have begun to discover the patterns, which has led to the influx of a large number of profit-seekers. With the fixed mindset generated by the established model of LPD products, short-term speculative arbitrage behavior has begun to intensify. Similarly, due to the impact of the bear market, investors' patience and trust have begun to decline, and long-term holders have become fewer and fewer.

Under the standard mode of Launchpad, users gradually became numb to it. In the eyes of some investors, Launchpad is no longer the incubator of early new projects, but has become an arbitrage tool for short-term speculators. Of course, some investors also regard their income as "financial management income for BNB holders" instead of enthusiastically looking forward to the "wealth-making myth" of the next new coin. When this investor mentality is reflected in the market, it becomes the Launchpad wealth effect "not satisfactory".

But in fact, in terms of the growth changes of the entire Launchpad sector projects, we can find that, for example, Injective Protocol (INJ) and Polygon (MATIC) have experienced one or several stable cycles, and only after being driven by the market trend have they achieved a real value explosion and created a myth of wealth creation with a growth of more than 100 times. In other words, there is no "absolute" growth rule in the Binance Launchpad market. The so-called "speculative mentality" may face greater investment risks. Only the long-term wealth accumulation under the interaction of investors' DYOR and the market environment is a more reliable way of income.

3. Intensified market competition

In the IEO field, there has always been a distinction between "Binance Launchpad" and other IEOs. With the rapid development and intensified competition in the industry, coupled with the arrival of the bear market and the depletion of liquidity, the Launchpad sector has also become a "must-fight place" for major exchanges. More and more CEXs have begun to follow Binance's footsteps and follow this model, and Binance Launchpad has inevitably encountered greater challenges. However, in the current market context, Binance Launchpad is undoubtedly the best investment target when the market is calm, and its market share still ranks first.

 Source: https://chainbroker.io/platforms/

From the above, although there are some noises about Binance Launchpad, we can still see that the reason for its controversy is mainly related to the current market environment. As He Yi said before, "Binance listing is not decided by one person, and the logic of listing is to take into account the needs of most users." Just as "everything has its own light and shadow sides", so is Launchpad. It is not easy to take into account every project party and user in such a large capital market, especially in a bear market. The overly impetuous market environment has also doubled the market pressure on Launchpad, and all Launchpad can do now is to take into account the needs of most users and project parties as much as possible.

In fact, many LPD users we interviewed still have expectations for the wealth effect of Binance Launchpad. The vast majority of users said that the projects on Binance Launchpad are of high quality and have great potential. They are still optimistic about its wealth effect and hope to gain benefits and realize wealth appreciation by participating in Binance Launchpad.

“The wealth effect of Binance Launchpad can be sustained. Basically, the opening price of LPD will be more than 10 times or even 20 times the cost price. All Binance Launchpad projects must pass the assessment of Binance Labs, and Binance Labs is undoubtedly still one of the top venture capital institutions in the crypto field. Their vision is not too bad.”

—— Ryan

“Binance’s leading position is still solid, its brand image is deeply rooted in people’s hearts, and it has always been quite well-organized, which means that it still has strong bargaining power for most projects, thus providing Launchpad with a steady stream of high-quality projects to consolidate user loyalty. Therefore, I believe that the wealth effect of Launchpad can continue, even in a bear market.”

——Jacob

How to continue to dominate the Launchpad market?

Since a series of black swan events such as FTX occurred last year, the global crypto market as a whole has begun to fall into the dilemma of market liquidity shortage, but Binance Launchpad is still deeply rooted in the hearts of the people with its "leading" brand image and stable returns. In the face of doubts from some users and competition from peers, how should Binance respond and continue to dominate the Launchpad market?

In fact, in the long history of the development of the traditional investment market, the IPO of US stocks has also encountered difficulties similar to Binance Launchpad. Issues including "uncertainty of winning results", "market volatility", "high competition" and "IPO pricing" also affect the profit feedback of new stock subscriptions. Solving these difficulties requires the joint efforts of brokerage firms and investor market conditions. If it comes to Launchpad, Binance and investors need to work together.

1. Educate and train investors

Drawing on the development history of traditional securities firms mentioned above, strengthening investor education cannot be ignored. Binance has an obligation to provide investors with comprehensive and detailed project white papers and related information, regularly publish market reports to analyze market trends, and assess project risks and provide risk warnings to help investors understand the basic situation of the project more comprehensively. At the same time, Binance should also provide investors with risk management education, strengthen their investment capabilities and decision-making levels, and further improve the quality of Launchpad from the user level, thereby improving the platform's competitiveness and influence and widening the gap with other competitors.

In fact, Binance has also been working hard to explore the education and training of investors. At present, Binance has launched Binance Research, which is committed to the most cutting-edge research in the blockchain field, and regularly releases "project research reports" on the blockchain industry and Binance's online trading currencies. On the basis of improving industry transparency, it focuses on solving the problem of information asymmetry between project parties and investors, reducing investors' investment risks, and protecting their investments.

2. Strengthen project selection and screening

In view of the uncertainty of project quality, Binance can further strengthen the selection and screening of projects to ensure that each project has the characteristics of innovation, potential and sustainable development. In the face of the bear market and the decline in capital activity, users prefer short-term hot spots. While strengthening the screening of high-quality projects, Binance should be more sensitive to market changes and explore short-term hot projects.

Regarding the above-mentioned dispute with the project party, Binance Launchpad should perhaps adopt relatively flexible listing rules for popular and potential projects, so that the rules are more fair and applicable to truly good projects, because only through truly high-quality projects can Binance Launchpad win more attention and recognition from users and investors.

3. Introducing more flexible subscription methods

In fact, Binance’s original intention of “launching Launchpad to promote the development of high-quality cryptocurrency projects and provide investment opportunities for investors” has not changed. However, with the passage of time and changes in the market, the formation of the established new listing model may lead to a much less positive market response than before. Therefore, “how to re-mobilize the market’s enthusiasm in terms of the model” has become a question that Binance Launchpad needs to consider for its continued wealth effect.

In view of the fact that users think the current Launchpad market response is "boring", it is necessary to introduce more flexible subscription methods, such as tiered subscription and open auction, to meet the needs of investors with different needs, increase user participation in the project, and improve the fairness and transparency of the subscription process. In addition, for high-net-worth long-term BNB holders, partial priority subscription and exclusive subscription services can also be provided accordingly to increase the return rate of long-term holders.

4. Strengthen Launchpad project review

He Yi previously stated in response to the “rat trading” issue, “Binance monitors the wallets and market maker accounts of Launchpad project parties. Currently, Launchpad project tokens require project party tokens to be managed by multiple parties as part of mutual supervision.” In fact, Binance has always maintained a strict attitude in the review and supervision of coin listings, and has been exploring more complete supervision methods.

Regarding coin listing review, Binance can introduce various audit methods, such as technical review, financial review, compliance review, etc., to comprehensively evaluate the feasibility and risks of the project and improve the quality and reliability of the project. At the same time, it can also learn from the governance model of DeFi and promote the community governance mechanism of the Launchpad platform. By allowing investors holding platform coins to participate in the decision-making and management of the project, the participation and trust of platform users can be improved.

For Binance, controlling the "quality of the project party" and "investor threshold" is equivalent to controlling the risks on both the "in and out" ends. How to "stay true to our original aspiration" and put ourselves on an equal footing with project parties and investors, while paying close attention to the interests of users while providing high-quality projects, is also something Binance needs to think about.

Of course, from the above-mentioned controversies, we can also see that in the face of some noise about Launchpad, Binance may appropriately delegate power to users, project owners and the market, and listen to the voices of all parties, which is also the key to making Launchpad regain its popularity. At present, Binance has opened public social channels such as Twitter and Binance Square to better "brainstorm" in the market and grasp the development pulse of the current encryption field.

summary

From the financial crisis to the subprime mortgage crisis, the fact that the subscription model of U.S. stocks has survived to this day also proves the correctness of its system and its wealth effect. Inspired by this, Binance Launchpad will continue and develop on this basis in the future.

In a bear market with wailing everywhere, Binance's market share still ranks first, and the role of Launchpad is unquestionable.

Just as Zhao Changpeng had previously stated in an AMA that "the bear market environment has attracted more projects to seek help", how to carefully select good projects, increase the number of exchange users and trading volume to activate the market, while enhancing the voice of listing coins and brand influence, and expanding the ecosystem, thereby providing users with more investment opportunities and creating value, is a direction that Binance Launchpad needs to think about in the long term, and it is also the "only way" to achieve its strategic intentions.

At a time when liquidity crises can easily lead to bank runs and stampedes, Launchpad's strategic focus has gradually begun to shift from the initial market share to the cultivation of user loyalty and the development of reputation. This is the only way for a company to grow into a "century-old" company, and it is also the top priority for stabilizing the platform market in a bear market. How to better meet users' profit expectations has become Launchpad's current development direction.

At present, Binance has launched Launchpool based on Launchpad, using methods such as "BNB mining, withdrawal and sale" to further increase the annualized return rate of BNB long-term holding. According to CAPITALISMLAB data (from 2021 to April this year), the total return rate of BNB is 52%, and the annualized rate is 21%, which is more than twice the ETH Staking income in the same period.

In addition, Binance Launchpad has also made adjustments to the listing of coins based on market preferences, user preferences, and platform preferences. According to chainbroker statistics, we can also see that compared with previous projects, recent IEO projects (HOOK, ID, and EDU) are ranked in the top ten, with higher quality and higher average returns.

 Source: https://chainbroker.io/platforms/

According to data from Binance’s official website, Binance Launchpad has raised more than US$100 million for the project.

As far as the current liquidity crisis in the global crypto market is concerned, "with great power comes great responsibility." Binance has become the mainstay in the bear market with its huge influence and strong market liquidity. Launchpad is still a powerful competitive weapon for Binance to expand its market share and increase its wealth effect. As the market gradually recovers, the wealth effect of Launchpad may continue and expand, because Binance Launchpad is more capable than ever to raise funds for outstanding projects in trouble in the bear market and create a more eye-catching wealth effect.