Can Binance Launchpad, which has topped the charts for over 4 years, continue to thrive?

Author: Mia, ChainCatcher

For a long time, participating in new stock offerings has been regarded as a high-probability investment method in the market, attracting various funds. From U.S. stocks to Hong Kong stocks, new stock subscriptions have been recognized by investors, with some referring to it as "risk-free returns." Binance has brought this "IPO" model of new stock subscriptions into the cryptocurrency space, giving birth to the "Launchpad" IEO model tailored to the exchange's own circumstances.

Since its launch, Binance Launchpad has become a sector with the highest potential for generating hundredfold or even thousandfold tokens. As of September this year, the Launchpad sector has launched 31 cryptocurrency projects, and "grasping Launchpad" has gradually become a guiding principle for users. After all, following smart money has always been a good strategy for profit in the investment world; who could be smarter than the largest cryptocurrency exchange? The IEO model has also become the most favored method for new stock subscriptions among users due to its low risk and low participation threshold.

Now, with the arrival of the bear market and the increasingly depleted liquidity in the market, the Launchpad model, with its stable returns, is becoming a new focus for exchanges competing for users. Major exchanges are successively launching their own Launchpad products, all wanting to get a piece of the pie. Binance's LPD product continues to lead with high-quality projects and stable wealth creation effects. So, what strategic intentions should not be overlooked behind its wealth effect? ChainCatcher will explore the intentions and dilemmas behind the wealth effect of Binance Launchpad in this bear market, as well as the optimization and improvement of future systems.

Mechanism Characteristics and Strategic Intent

As is well known, IEO stands for Initial Exchange Offerings, which refers to the behavior of exchanges acting as issuers to directly issue tokens to users of the exchange and help project parties raise funds. Unlike the ICO model, IEO skips the step of "public fundraising" to the public in advance and directly places asset shares on the secondary market for trading.

For a long time, Binance Launchpad has served as Binance's exclusive token issuance platform, providing Binance users with priority subscription rights for high-quality projects to support the cryptocurrency industry's ecosystem. Users need to hold a certain amount of BNB to participate in new stock subscriptions, and the final allocation of new tokens depends on the ratio of the amount of BNB a user invests to the total amount of BNB invested by all participating users, with a hard cap on each user's token allocation 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, achieving mutual benefits, or simply focusing on user experience and wanting to give back to users. More importantly, it reflects a profound strategy to expand its share in the cryptocurrency industry.

1. Achieving User Growth

"The product itself creates value, user growth transmits value, and the ultimate goal is to complete value conversion" is a common thought process for product growth, and Binance has injected this thinking into the Launchpad product. Launchpad creates value for Binance users with its "guaranteed profit" wealth effect, which has become an important factor in attracting users. As more and more investors begin to pay attention to Launchpad and are willing to try it, the stable returns from Launchpad have allowed this group of users to taste success.

As the wealth effect of Launchpad begins to circulate and expand among investors, external cryptocurrency users naturally choose to dive into Binance with liquidity, and Launchpad has completed value conversion while attracting external liquidity, gradually becoming a powerful tool for increasing platform user numbers. Additionally, while increasing platform trading volume, the Launchpad product also enhances Binance's market share and solidifies its position as a leading global digital asset exchange.

2. Maintaining BNB Price

From ICO to IEO, exchanges have been seeking a new balance, which is the "platform token." Inspired by IPOs in U.S. stocks, Binance cleverly combines the platform token "BNB" with the IEO model, allowing users to participate in LPD project subscriptions simply by holding a certain amount of BNB. The funds invested (amount of BNB) are linked to the allocation of subscription tokens. This mechanism greatly stimulates the market purchasing power of BNB, and when the wealth effect of LPD projects forms, it also brings a large amount of external liquidity into the BNB market.

Of course, we can also view LPD projects as another form of empowerment for BNB. Whenever a new LPD project is launched, it always causes fluctuations in the BNB market, and most holders value the long-term returns of BNB. According to data previously disclosed by CAPITALISMLAB (from 2021 to April this year), if tokens are sold on the first day, the total return rate based on BNB is 36%, with an annualized return of 14%, even higher than the returns from ETH staking during the same period, making BNB one of the most valuable cryptocurrencies for long-term investment after BTC and ETH in the minds of investors.

Data Source: capitalismlab

Even in a bear market, despite the cryptocurrency market cap falling to historical lows, according to CoinGecko data, BNB currently ranks fourth in market cap, second only to USDT, and the stabilizing effect of Launchpad on BNB should not be underestimated.

Data Source: CoinGecko

In summary, supported by Binance's "top" influence, Launchpad attracts a large number of internal and external investors to participate. Investors not only enjoy BNB returns but also gain the right to participate in IEOs, significantly increasing the yield of BNB while maintaining the stability of the BNB market. Launchpad acts as a moat for the BNB market in the bear market, stabilizing the token price while continuously mobilizing liquidity.

3. Increasing Token Listing Influence

The birth of Launchpad is a key step for Binance to activate its platform token, but it also embodies its ambition to master the influence over token listings. From SFP to GMT to HOOK, every new offering from Binance's LPD product has lived up to expectations, establishing a good reputation for Launchpad among users and project parties by promoting high-quality projects, while also garnering trust and attention for Binance Launchpad.

"Listing on Binance" has gradually become a belief and "pump warning" for every holder. Driven by profit-seeking mentality, more and more investors have begun to trust Binance, and Binance has also become the ultimate destination for various projects. The abundant liquidity advantage, large user base, and enthusiastic market response have collectively increased Binance's influence over token listings and brand impact, while the emergence of Launchpad has become a safe haven for various new projects.

4. Cultivating User Loyalty

In fact, with the development in recent years, whether in terms of market share, user growth, or influence over token listings, Binance has achieved complete leadership. Due to regulatory factors and others, Binance's current development strategy has gradually shifted from competing for market share to cultivating user loyalty.

Since its inception, Launchpad has become one of the main ways for Binance to share and return platform dividends to users by providing high-quality projects. While meeting user interests, it also attracts users' attention and recognition, thereby enhancing users' recognition and loyalty to the exchange. Binance interacts the stable returns of Launchpad with the long-term holding returns of BNB, increasing the sources of income for BNB holders while effectively enhancing platform user stickiness and cultivating long-term user loyalty.

Moreover, the emergence of Launchpad has also built a more complete digital asset ecosystem for Binance: by introducing high-quality projects through Launchpad to attract new users while benefiting existing users, and Binance's suite of products provides users with more investment opportunities and channels for project participation, continuously expanding the ecosystem and achieving good retention and conversion of attracted users while retaining more old users.

Where Will the Wealth Effect of Launchpad Go?

According to ChainCatcher data, from 2021 to the present, the 18 IEOs conducted have an average first-day increase of 1445%, with an average maximum increase of 50.24%. Among them, GMT has the highest increase of 41686%, ranking first, and can be considered the most successful project in the history of Launchpad.

Note: Data is based on USDT trading pairs, first-day increases are calculated based on the closing price at UTC+0, and maximum increases do not account for the highest price generated by severe fluctuations within the first hour of listing.

From the table above, it is not difficult to see that from wallets to fan tokens to decentralized domains and the education sector, Launchpad has had its shining projects at each stage. However, as the market turns bearish, trading volumes shrink, and liquidity crises spread, Launchpad products also face challenges. Since reaching the "benefit myth" of GMT, the historical maximum increase has seen a slight decline. Although the overall return rate far exceeds that of projects before GMT, it seems difficult to reach the heights previously achieved by GMT.

1. "Uncertainty" of Project Quality

In fact, since the launch of Launchpad, Zhao Changpeng has emphasized that "the core of the IEO model is to find good projects, and the original intention of Launchpad is to help entrepreneurs and promote industry development." However, in the development of Launchpad, we can also see that from club fan tokens to "Move to Earn" Web3 applications, although they were all new LPD projects at the time, their market performance has been uneven.

Setting aside the so-called "mental accounting" factor (projects with lower starting prices are more likely to attract investor interest), the generally higher increases for lower starting prices may be related to the quality of the projects themselves. From the "sister scandal" HOOK to the "education windfall" EDU, there have always been voices in the market questioning Binance's "listing preferences," with some users beginning to doubt the so-called listing criteria of Launchpad.

However, according to research from CapitalismLab, the three tokens launched since HOOK have all performed above average across various metrics. 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, with a first-day return rate based on BNB of 1.5 times and a historical maximum return rate of 1.3 times. This means that these projects launched during the bear market are actually more profitable than most projects launched during bull markets.

Looking at the entire market, the so-called "sister scandal" and similar listing controversies are largely influenced by the bear market environment, leading to an overall loss of wealth in the market, which has also affected the wealth effect of Launchpad products. The various controversies among investors are also an "inevitable product" of the bear market. As previously publicly stated, Binance does not have phenomena such as "insider trading," "relative tokens," or so-called "sister tokens," and Binance still cares about the wealth effect, and its current performance is still optimal.

"Rumors stop with the wise." In terms of the market itself, how to control the overall quality of listings from the source of projects, adhering to Binance's principle of selecting "good projects," and creating more positive value for users remains a direction for Binance Launchpad to maintain its wealth effect during the bear market.

2. Amplified "Speculative" Psychology in Bear Market

With the successive launches of Launchpad products, the patterns of their increases have begun to become traceable, and attentive investors have started to discover the underlying rules, leading to a surge of profit-seekers. As fixed thinking emerges from the established model of LPD products, short-term speculative arbitrage behavior has intensified. Similarly, due to the challenges posed by the bear market, investors' patience and trust have begun to wane, and the number of long-term holders is decreasing.

In the standard model of Launchpad, users are gradually becoming numb. In the eyes of some investors, Launchpad is no longer the incubator for early new projects but has become a tool for short-term speculators to arbitrage. Of course, some investors view their returns as "investment income for BNB holders," rather than eagerly anticipating the next new token's "wealth creation myth." When this investor mentality reflects in the market, it results in the wealth effect of Launchpad being "less than satisfactory."

However, in fact, looking at the changes in the increase of projects in the entire Launchpad sector, we can find that, for example, Injective Protocol (INJ) and Polygon (MATIC) experienced one or several stable cycles before achieving true value explosions driven by market trends, creating wealth myths with over a hundredfold increases. In other words, there is no "absolute" increase pattern in the Binance Launchpad market; the so-called "speculative mentality" may face greater investment risks. Only through investors' DYOR (Do Your Own Research) and the interaction with market conditions can long-term wealth accumulation be a more reliable way to achieve returns.

3. Intensified Market Competition

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

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

From the above, although there are some noises surrounding Binance Launchpad, we can still see that the reasons for the controversy are largely related to the current market environment. As He Yi previously stated, "The listing on Binance is not determined by a single person; the logic of listing aims to consider the needs of most users." Just as "everything has its light and shadow," so does Launchpad. In the vast capital market, it is not easy to consider every project party and user, especially in a bear market, where an overly anxious market environment increases pressure on the Launchpad market. What Launchpad can currently do is to try to accommodate the needs of most users and project parties.

In fact, many LPD users we interviewed still maintain expectations for the wealth effect of Binance Launchpad. The vast majority of users stated that the projects on Binance Launchpad are of high quality and potential, and they still have confidence in its wealth effect and hope to gain benefits and achieve wealth appreciation through participation in Binance Launchpad.

"The wealth effect of Binance Launchpad can continue. Basically, the opening price of LPD will be more than 10 times the cost price, even 20 times. The projects on Binance Launchpad must pass the assessment of Binance Labs, which is undoubtedly one of the top venture capital institutions in the cryptocurrency field, and their vision is unlikely to be poor."

------ Ryan

"Binance's leading position remains solid, and its brand image is deeply rooted in people's hearts. It has always been quite strategic, which means it still has strong bargaining power over most projects, providing a continuous stream of high-quality projects for Launchpad to solidify user loyalty. Therefore, I believe the wealth effect of Launchpad can continue, even in a bear market."

------ Jacob

How to Maintain Dominance in the Launchpad Market?

Since the occurrence of a series of black swan events such as FTX last year, the global cryptocurrency market has begun to face a liquidity shortage. However, Binance Launchpad continues to be deeply rooted in people's minds with its "top" brand image and stable returns. In the face of some user doubts and competition from peers, how should Binance respond and continue to dominate the Launchpad market?

In fact, throughout the development of the traditional investment market, the U.S. stock new offering model has also encountered dilemmas similar to those faced by Binance Launchpad, including "uncertainty of lottery results," "market volatility," "intense competition," and "IPO pricing," all of which also affect the return feedback from new stock subscriptions. Solving these dilemmas requires the joint action of brokers and investors in market conditions. Therefore, applied to Launchpad, it requires the joint efforts of Binance and investors.

1. Educating and Training Investors

Drawing from the historical development of traditional brokers, strengthening investor education is essential. Binance has the obligation to provide investors with comprehensive and detailed project white papers and relevant information, regularly publish market reports analyzing market trends, and assess project risks to provide risk warnings, helping investors gain a more comprehensive understanding of the project's basic situation. At the same time, Binance should also educate investors on risk management, enhancing their investment capabilities and decision-making levels, further improving the quality of Launchpad from the user level, thereby increasing the platform's competitiveness and influence compared to other competitors.

In fact, Binance has been actively exploring investor education and training. Currently, Binance has launched Binance Research, dedicated to cutting-edge research in the blockchain field, and regularly publishes "project research reports" on the blockchain industry and cryptocurrencies listed on Binance, focusing on solving the information asymmetry between project parties and investors, reducing investment risks for investors, and safeguarding their investments.

2. Strengthening Project Selection and Screening

In response to the uncertainty of project quality, Binance can further strengthen the selection and screening of projects to ensure that each project possesses characteristics of innovation, potential, and sustainable development. In the face of bear market challenges and declining capital activity, users tend to prefer short-term hot projects. Binance should not only strengthen the screening of high-quality projects but also be more sensitive to market changes and adapt to discover short-term trending projects.

Regarding the aforementioned disputes with project parties, Binance Launchpad may need to adopt relatively flexible listing rules for projects with high popularity and potential, making the rules fairer and more applicable to truly good projects. Only through genuinely 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, as time goes on and the market changes, the established new stock subscription model may not resonate as strongly as before. Therefore, "how to rekindle market enthusiasm through the model" has become a question that Binance Launchpad needs to consider for its continued wealth effect.

In response to users feeling that the current Launchpad market response is "dull," more flexible subscription methods should be introduced, such as tiered subscriptions or public auctions, to meet the diverse needs of investors, increase user participation in projects, and enhance the fairness and transparency of the subscription process. Additionally, for high-net-worth long-term BNB holders, some priority subscription and exclusive application services can be offered to improve the new stock return rate for long-term holders.

4. Strengthening Project Review for Launchpad

He Yi previously stated regarding the "insider trading" issue that "Binance monitors the wallets of Launchpad project parties and market maker accounts, and currently requires project tokens to be multi-custodied as part of mutual supervision." In fact, Binance has always maintained a strict attitude towards token review and regulation and has been exploring more comprehensive regulatory methods.

For token review, Binance can introduce multiple review methods, such as technical review, financial review, and compliance review, to comprehensively assess the feasibility and risks of projects, enhancing project quality and reliability. At the same time, it can also draw on the governance model of DeFi to promote a community governance mechanism for the Launchpad platform, allowing investors holding platform tokens to participate in project decision-making and management, thereby increasing user participation and trust in the platform.

For Binance, controlling the "quality of project parties" and "investor thresholds" equates to controlling the risks at both ends of "in and out." How to "stay true to the original intention" and place itself in an equal position between project parties and investors while providing high-quality projects and paying close attention to user interests is also something Binance needs to consider.

Of course, from the various controversies mentioned above, we can also see that in the face of some noise surrounding Launchpad, Binance may appropriately delegate power to users, project parties, and the market, listening to voices from all sides, which is also key to rekindling enthusiasm for Launchpad. Currently, Binance has opened public social channels such as Twitter and Binance Square to better "gather wisdom" in the market and grasp the pulse of development in the cryptocurrency field.

Conclusion

From the financial storm to the subprime mortgage crisis, the survival of the U.S. stock subscription model to this day proves the correctness of its system and wealth effect. Inspired by this, Binance Launchpad will also continue to develop and evolve based on this foundation.

In the bear market, amidst widespread despair, Binance's market share remains firmly in first place, and the role of Launchpad is undoubtedly significant.

As Zhao Changpeng previously stated in an AMA, "The bear market environment has led more projects to seek help." How to carefully select good projects while increasing exchange users and trading volume to activate the market, enhance influence over token listings and brand impact, and expand the ecosystem to create more investment opportunities for users is a long-term direction for Binance Launchpad to consider and the "only way" to achieve its strategic intentions.

In a liquidity crisis that can easily trigger a run, the strategic focus of Launchpad is gradually shifting from the initial market share to cultivating user loyalty and enhancing reputation. This is an essential path for a company to grow into a "century-old" enterprise and is crucial for stabilizing the platform market during a bear market. How to better meet users' return expectations is the current development direction for Launchpad.

Currently, Binance has launched Launchpool based on Launchpad, further increasing the annualized return rate for long-term BNB holders through methods such as "BNB mining and selling." According to CAPITALISMLAB data (from 2021 to April this year), the total return rate based on BNB is 52%, with an annualized return of 21%, more than double the returns from ETH staking during the same period.

Additionally, in response to market preferences, user preferences, and platform preferences, Binance Launchpad has also made adjustments to token listings. According to statistics from Chainbroker, we can see that recent IEO projects (HOOK, ID, and EDU) rank among the top ten, with higher quality and average return rates than previous projects.

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

According to data from Binance's official website, Binance Launchpad has raised over $100 million for projects.

In light of the current liquidity crisis in the global cryptocurrency market, "with great power comes great responsibility." Binance, with its significant influence and strong market liquidity, has become a pillar during the bear market. Launchpad remains a powerful competitive tool for Binance to expand its market share and increase wealth effects. As the market gradually recovers, the wealth effect of Launchpad may continue and expand, as Binance Launchpad is more capable than ever of raising funds for excellent projects trapped in the bear market, creating even more remarkable wealth effects.