Bittrex CBO: Why Bittrex Lost its Lead, Token Sales’ Critical Mistakes, and How to Get Listed (Interview)

Bittrex Global is the international arm of the Seattle, Washington-based U.S. Bittrex exchange. It is based in Liechtenstein, and it’s registered and supervised by the local financial market authority. For the first years of crypto trading and until the 2017 bull run, Bittrex was considered to be among the leading exchanges, and founders were eager to list their tokens on the US-based exchange.

Chris Sinkey is the Chief Business Officer and Listing Director for Bittrex Global for non-U.S. users.

At the Paris Blockchain Week conference in April, CryptoPotato sat down with Sinkey for an illuminating conversation about the history of Bittrex, the current state of crypto exchanges with regard to security and regulation, and the future of token sales.

Sinkey told us that “It became clear that due to regulatory clarity, it made a lot of business sense to segregate our user base between US and non-US.

Bittrex and Bittrex Global: What’s the Difference?

Sinkey revealed that they created the new international entity called Bittrex Global in search of regulatory clarity and based it in Liechtenstein, where the company is registered and also supervised.

Both companies (Bittrex and Bittrex Global) continue to have “a relationship to this day from an engineering perspective.” In other words, Bittrex supports the engineering backend, the trading infrastructure, the matching engine, wallet, integrations, and the new product development of Bittrex Global.

Moreover, the level of integration between both companies, along with stringent anti-money laundering regulatory compliance, allows for a shared liquidity pool as opposed to what other exchanges such as Binance do:

“Other exchanges, like Binance, do the reverse of that. They came into the US using the same infrastructure, but they created a US exchange.

The difference is that our order books are shared with Bittrex US. […] So in a Bitcoin order book, because both markets are available for trade, a U.S. customer can be the counterparty to trade with a European customer. That’s because all customers on our platform are KYC’d and we follow very stringent and compliant AMPL process.”

Bittrex: From Top Exchange in 2017 to Lagging Behind

Bittrex used to be one of the top exchanges in the world by trading volume back in 2017, but it was also during that year when it started to lag behind.

Sinkey elaborated on that and recollects the industry back then being much different compared to now. He told us that it “was wild” when he joined Bittrex back in 2017, in the middle of that year’s legendary, insatiable bull run.

“Shortly after I joined Bittrex, it was the largest exchange in the world by trading volume and number of markets. And there was so much demand for accounts at that time as Bitcoin’s price ran up from two to three thousand, then up to $17K, $18K, and $19,000.

One of our servers that supported new account signups was having trouble handling the load. We had to throttle our new users.

It’s actually one of the reasons why Binance was able to grow. Because the users that couldn’t get into Bittrex had to go somewhere. Binance was the new exchange at that time. They had just done their ICO the summer before and they were really starting to grow in popularity.”

Sinkey said the reason other exchanges have taken so much market share in the following years is the amount of capital they’ve raised and plowed into marketing.

He told us Bittrex has made the conscious decision to remain entirely private and self-funded. The crypto exchange has never raised any outside capital or launched massive, VC-funded marketing campaigns. Instead, he says the company has focused on its long-term strategy on stringent regulatory compliance and reliable custody practices.

“We’re very excited to be in Liechtenstein and Bermuda. So we also have Bittrex Global Bermuda and we have a Digital Assets Business Act license – a DBA license out of Bermuda. We’ve found regulators to be fantastic to work with.”

As far as custody goes, Bittrex boasts some of the best security in the crypto exchange industry. The three founders of the company are cybersecurity experts with a background from Microsoft, Amazon, and Blackberry.

Which Tokens Are Getting Listed (and Delisted)

Coin listing policies are a major friction point within the cryptocurrency community, and we wanted to know more about the approach of Bittrex.

Sinkey told us that they took “the approach of support the long-tail of crypto assets rather than trying to be selective and trying to choose which project is going to be a winner versus not a winner. We like to let the market decide.”

However, he also made it clear that they have rigorous compliance and due diligence process and a technical review process.

“We break our listing process down into three pillars: legal, compliance, and technical. A legitimate project with a desire to bring a new crypto forward, we’ll take a look at it and run them through our process. If they pass those three due diligence phases, then we’ll list them.”

When it comes to delisting, the CBO told us that it “is almost always related to liquidity – it’s almost always related to a market that isn’t showing demand from our user base over a long period of time. Or there’s not liquidity provided by any kind of institutional market maker or support the liquidity for that market.”

The Biggest Mistake of Token Sales

During our conversation, Mr. Sinkey offered some advice for new crypto startups trying to raise money by issuing tokens. His London Business School MBA shines in this part of our interview.

He believes that the number one mistake teams make when raising funds is that “they get confused as to the difference between equity and commodities.

“99.9% of the listings we do are utility tokens. Those are commodities. When a team goes out to the market to fundraise, they’ll structure their presale and they’ll go to the market with a public sale with more of an intent to raise money than to distribute their token to token holders, for the purposes of enabling users to use the token in their ecosystem that they’re building.”

This, in turn, translates to the number one reason for which most projects fail. He believes that teams should be raising in the right way and selling equity to accredited investors. Later, they should distribute their token “in such a way that enables utility in an ecosystem.”

“That’s probably the biggest mistake that I think a lot of smaller, younger teams don’t really have a grasp of the differences there. Nor why and when they should choose which path for what. They end up overselling the token.

This creates way too much supply and way too many sellers. Because most people bought in for investment purposes as opposed to utility purposes. Then the token price craters and the project dies.”

His advice is to structure the pre-sale right. For this to happen, the team needs to really understand what they’re trying to accomplish and “got o market with a presale for your token only if you need to.”

Sinkey argued that teams should only sell as much as they need to and to the right buyers. This brought him to his other point:

“Choose your buyers wisely. If you’re doing a presale and you have a token that’s B2B in nature, why are you selling it to retail traders who can’t ever use that for utility purposes?

If your business is B2B in nature, go to customers and sell the token to them, or do a proof of concept with them and put it in their hands and see if your platform has utility.”