(Also posted on Reddit: ~~~ embed:gridcoin/comments/9jfnbu/on_the_delisting_of_gridcoin_from_poloniex/ ) reddit metadata:fGdyaWRjb2lufGh0dHBzOi8vd3d3LnJlZGRpdC5jb20vci9ncmlkY29pbi9jb21tZW50cy85amZuYnUvb25fdGhlX2RlbGlzdGluZ19vZl9ncmlkY29pbl9mcm9tX3BvbG9uaWV4LyApfA== ~~~
Last week, Poloniex announced the delisting of Gridcoin from their platform. This change went into effect a few days ago. As many are aware, the market response to this announcement was dramatic and visceral – in less than an hour, the price of Gridcoin on Poloniex dropped from 300 Satoshi to as low as 80 before rapidly recovering to near 200. Since then, the average price across exchanges has stayed in the range ~170-230 Satoshi, a drop of around 30% compared with the price before the delisting announcement.
Is the market response commensurate to the delisting news? In short, is Gridcoin really worth 30% less now? I don’t think so. Clearly the value intrinsic to the blockchain itself is unchanged, since nothing in the blockchain fundamentals changed before vs. after the price drop. So that’s not a factor. It is true that presence on an exchange increases the value of a coin by a small amount, via increased liquidity, visibility, and potential commercial prospects as the exchange expands its operations in the future. Nevertheless, I find it hard to believe that 30% of a coin’s value can rest in its presence on a single exchange (out of several), rather than in the fundamentals of the blockchain protocol itself. (And if that were the case, it's a problem for crypto as a whole, not just Gridcoin.)
Following this reasoning, I believe the value of Gridcoin cannot have changed by over 30% as a result of the delisting alone. Maybe 5%. But not over 30%.
Does this mean Gridcoin is currently underpriced? Not necessarily. The price of something is not always equal to its value. This fact is an issue for crypto in general, since there is disagreement over how to determine the value intrinsic to this or that blockchain. Compare the situation with the stock market, where there are standard (though not perfect) methods for estimating a stock’s value. Because of this, it’s entirely possible the price of Gridcoin was inflated to begin with, and now the price is closer to the true value. Or that it was undervalued in the first place, and now is undervalued even more. But in relation to the delisting, this is a moot point since Poloniex’s decision to delist isn’t enough evidence by itself to require us to readjust our estimate of Gridcoin's value. We have to look at their reasons for delisting. Until we have done so, we shouldn’t rush to conclusions about whether the current price is an accurate estimate of the actual value.
I have my own thoughts on this question, but I will save those for a separate post in the near-future. In short, I think Gridcoin's outlook is still positive. The sticking point for the current post is just that (in my opinion) Gridcoin’s intrinsic value hasn’t changed by a large amount because of the announcement to delist, despite the significant change in price.
Disclosure: I own a balance of Gridcoin. While I have tried to be objective, my opinions should be evaluated in light of all available facts and evidence.
I don't have a background in economics but I have a simple explanation that may be valid.
My thoughts are that the closure of the Gridcoin market on Poloniex created a supply of coins that was not balanced with an equal demand.
There were probably many Poloniex users who had invested in Gridcoin without having a wallet outside of the exchange, these investors would most likely have been willing to sell their GRC for a lower value than the price on other marketplaces in order to convert GRC to another currency before the market closure deadline.
Unless there were buyers who where willing to collectively purchase all of the available GRC from Poloniex the market value of GRC was sure to drop.
Considering that there were at least several million GRC on Poloniex prior to delisting, this actually makes a lot of sense...
It's the market that decides the real price of any coin. All else is mere speculations!
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