Why Are Crypto Exchanges Removing Altcoins?

In late December 2019 a major cryptocurrency exchange announced that it would be delisting multiple altcoins, making them unavailable for trading. Altcoins are cryptocurrency tokens considered to be an alternative to major coins like Bitcoin and Ethereum. Technically speaking, all coins other than Bitcoin could be called altcoins.

The altcoin purge is the just the most recent action that has been taken by cryptocurrency exchanges to limit the number of tokens that can be traded. The reasons for the delisting can usually be boiled down to a lack of interest in a coin, but some altcoins suspected of being frauds can also be removed.

Poloniex Delists Seven Altcoins

The Poloniex cryptocurrency exchange is one of the world’s largest platforms for trading Bitcoin and other currencies. It announced in December 2019 that it would be removing the following tokens from its platform:

  • DigiByte
  • Factom
  • MaidSafeCoin
  • Omni
  • Primecoin
  • Vertcoin
  • Viacoin

The reason for these altcoins being removed from the exchange should be somewhat obvious. How many of these coins are familiar to you? Chances are you didn’t know any of them existed until you read this article. They are coins that never really got any traction on the cryptocurrency market.

DigiByte and Omni was marginally successful. DigiByte had a market cap of $75 million at the time it was delisted by Poloniex. That was good enough to make it 55th among tokens by trading volume. Omni was actually the first ICO and also the forerunner of Tether, another altcoin that has managed to gain some popularity.

Why Are Altcoins Chosen for Delisting?

Poloniex did issue a statement following the delisting of these tokens. The exchange stated that it wanted to improve the performance of its exchange while providing a better trading environment for traders. It isn’t hard to read between the lines. What Poloniex really meant to say was that it had no desire to list coins that have limited potential. Exchanges make their money from trading fees. Most of these coins are not being traded at a high volume.

But there can also be other reasons why Poloniex and other exchanges want to clean things up some. In the era of ICOs it is a sad but true fact that altcoins can be a way for schemers to raise some quick money. There are probably more than a hundred ICOs each year that result in the creation of an altcoin that goes nowhere. Sooner or later those coins vanish into obscurity, leaving those who invested in them holding a worthless piece of virtual currency.

Consider the XPAT cryptocurrency that was created as a part of a project called Bitnation. The idea behind Bitnation was that individuals could use XPAT to create their own virtual nations. Founded by Susanne Tarkowski Templehof, Bitnation raised more than $1 million in Ethereum with the XPAT ICO. The coin failed to achieve listing on any prominent cryptocurrency exchange, and has always been valued at less than $0.01. Substantially less. Yet, Tarkowski and her developers got rich from the ICO.

When a token such as XPAT comes to be regarded as the offspring of a scam ICO, exchanges want no part of it. The reputable crypto exchanges today do not want any type of association with a token that has a bad reputation because regulations are increasing for cryptocurrency exchanges. Governments are beginning to hold the exchanges to a high standard.

What Does Delisting Mean for Crypto Investors?

Investors who hold altcoins could have their wisdom questioned in some cases. In others they were trying to make a profit on a coin they may have received as a bounty or from an airdrop. Either way, holding an altcoin when an exchange decides to remove it from a listing virtually guarantees that the token will die a slow death.

There is little point to holding on to an altcoin that has no potential to increase in value. For a token to appreciate in value it has to be traded or exchanged for something of value. If there is no one willing to accept the coin for goods and services, an ongoing problem for many digital tokens, the coin is essentially worthless.

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When an altcoin is delisted from a cryptocurrency exchange the other major cryptocurrency exchanges are likely to follow suit. The domino effect begins and the coin soon becomes little more than cyber junk.

The caution here for investors would be to stick with the altcoins that have proven themselves to have staying power. Ethereum, Litecoin, and Ripple are all safe choices. Even so, the value of these tokens can vary wildly from day to day.

Bitcoin still remains the big dog in the yard. It will likely never be challenged for the top spot. There will be others that come close, and those are the altcoins that you should focus on for investment purposes. Taking a flier on an obscure token is only going to leave you broke and disappointed in most cases.

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