More CEXes = Less Liquidity

Regarding the questionnaire:

https://forum.xx.network/t/help-shape-the-future-of-the-xx-network/7171/2

It’s good that the Foundation listens, but it’s sad that such low quality requests (to “add more exchanges”) is what surfaced and is being considered.

Such requests should be instantly dismissed and not even be considered. Everyone knows that on the whole, when everything else is the same more exchanges means less liquidity and worse quality-of-life for normal users and regular validators.

I noticed the questionnaire asks about market making, presumably because the whiners calling for “more exchanges” also want the Foundation to waste its funds not only on getting listed but also on funding market making so that these speculators can more easily offload whatever tokens they hold and want to sell. (If they didn’t wan to just sell, but also buy, they could easily market-make on their own.)

One thing that wouldn’t stay the same with the token listed on more exchanges would be more people would get the chance to buy xx and sit on it. But that’s too little to matter and useless in the big scheme of things. Considering the poor cost-benefit ratio, funds should instead be channeled in development of xxPostage and native DEX integration (more on that later).

I hope this will get easily rejected, but in the case it passes and funds get wasted despite everyone knowing it’s completely useless, I want to note here:

  • Requests likely originate by traders/speculators and not chain users, regular validators, or even cMixx users and do nothing for the project
  • There’s no need to add any exchanges when MEXC is easily approachable and the volume on DEXes is constantly growing. Adding additional CEX exchange means more cost and lower liquidity, so even more funds would be required (market making) to achieve absolutely nothing in return
  • WXX has issues because it uses the sclerotic Ethereum L1. If the Foundation wants to invest, it should invest in a Substrate bridge that would not only enable native link to DEX on other Substrate chains (such as Polkadot, where they have stablecoins and whatnot and transactions are near-instant and cost next to nothing), but also half a dozen other use cases. But our traders have no idea about that or interest in anything except selling and speculating, so this doesn’t even come up in their tiny world.

If the Foundation decides to fund CEX waste, now I have an “I told you so” post to link to should that come to pass.

Agree on WXX, would like to hit cheaper L1 also like to get on the L2s where trading is hot (Base, Opt).

Can you elaborate on why CEX’s would decrease liquidity? I do not understand that statement, especially if we do what I would like and list on CEX’s in different markets.

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  1. Hyperbridge seems to be very successful within Substrate ecosystem and can even bridge to Ethereum and Binance Smart Chain, but the native Substrate features look awesome.

  2. More CEXes = Less Liquidity: I mentioned the assumption is all other things being equal and highlighted one exception that may be reasonable to make, which is that there would likely be more buyers which is a fraction of the users of the new exchange(s) that are now too lazy or unable to use one of the existing, or a DEX.

Let’s say some T2 Exchange has 1 million users, and maybe 5% are too lazy to open a MEXC account or alternatively use a DEX, so these would potentially buy a new token (not just xx, but in general) only if it’s available on their exchange.
I have several exchange accounts myself and I am not into trading at all, so I think 5% is generous. That’s 50K of potential buyers.
How many of they would actually buy a token just because it got listed? Maybe 2K?

Even if 10% of those lazy users become aware of xx token getting listed, they would look into liquidity and of course (at least initially) it would be thin. Most people know that if liquidity is thin, you can’t easily get in and out, so if you buy, it’s $10 or $50 , not $1K or $5K.

Why? Let’s see, 0.0412 and close to 90% of volume (which is still just $17K in daily volume!!!) is on MEXC.

Right now, buying $6K of xx on MEXC (10x bigger than the rest) would make the price zoom to 0.049, or close to 11%. In other words, you “lose” $600 if you buy $6K now, at market price. And that’s on the biggest exchange, MEXC!

Now, on this new exchange, it’s unlikely it’d be bigger than MEXC, so buying $1K of xx token would probably result in spending not 11%, but 20, 30 or 40% more.
So now it’s your (in)convenience vs. US$200…
At that point they go like: to hell with this, I’ll use Uniswap. Maybe I’ll spend $50 more than on MEXC, but I’ll save $150 compared to buying here!
Or they buy $50 (edit: on this new exchange because that won’t move the price).
Or they set a Limit buy order for $1000 at $0.4099 which remains unfilled for 5 days on this new exchange because anyone who wants to sell xx today will follow the same logic as earlier and just sell on a DEX or MEXC for $50 more than dump at below average price on this exchange with thin liquidity, low depth, and big spreads.

We also have to assume that xx liquidity is not proportional to the size of the exchange (although MEXC is pretty large, to be fair) and the fact that the coin gets another market doesn’t mean 24h Volume now skyrockets 50%. It may grow 10, 15%, and MEXC volume may drop 5-10%.


Another point I want to make regarding DEX - look at 2% depth on Uniswap. It’s better than on MEXC! You can buy $1000 of xx for just $20 “extra”.
Maybe there’s a market maker, or maybe DEXes are simply superior.
If there’s a market maker, I’d rather stick with existing one than pay for another one elsewhere.
If there’s no market maker there, then the depth on Uniswap speaks in favor of DEXes over CEXes.
Either way, I can’t see any reason why to list on another CEX unless it costs $0.

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The few loud ignoramuses from general (in xx Discord) are of course MIA here, as composing an argument longer than 10 words is likely an insurmountable challenge.

Those who want to (and can) think may want to consider [1] which is what I’ve been saying for years:

Customers shouldn’t need to know or care whether the trade is happening on a DEX or CEX.

It shouldn’t be hard to connect the dots here.

Homework for the ignoramuses from general (in xx Discord):

  • what could be the reason permissionless DEX listings a concern for Coinbase?
  • what does this mean for the cost and ease of listing on major US-based CEXes in coming months?

[1] x.com

DEX-to-CEX spot volumes hit another record high in Jan 2025.

(BTC and ETH) coins leaving CEXes (blue lines) as DEXes become good enough.

:man_shrugging: