What Is the "Coinbase Effect" and Does It Still Work? by Mint Dice

What Is the "Coinbase Effect" and Does It Still Work?

by Mint Dice Bitcoin Casino

The “Coinbase Effect” is a theory within the cryptocurrency community that postulates that if a token/coin, usually one relatively less well-known, gets added to the Coinbase exchange, its price will increase substantially.

Coinbase is one of the largest cryptocurrency exchanges as well as arguably the most user-friendly, making it the starting point for new cryptocurrency traders. The idea is that when a coin gets added to the once-exclusive list of tokens offered on Coinbase, it’ll receive mainstream attention, higher trading volume, and liquidity.

The Coinbase Effect has come into question several times over the past year, mainly due to the underwhelming price gains of the nearly dozen assets added throughout the period – which, to be fair, was in the troughs of the crypto winter.

The Coinbase Effect reached popularity in 2017 with the flood of attention from thousands of new speculators and investors. 2017 was a time where a simple rumor of a digital asset being added to the exchange could give it a double-digit percentage price increase. At the time, Coinbase only had three digital assets - Bitcoin, Ethereum (added July 2016), and Litecoin (added May 2017).

When Coinbase started adding more digital assets, the prices of those assets didn’t experience astronomical price increases as the trader psychology of 2017 would have anticipated. Ripple, for example, was added in February 2019 and the price per XRP only increase about 5%, leaving the asset to hover at around $0.30.

Stellar had a similar lackluster result: