What is an Exchange Token (Altcoin)

Photo by Behnam Norouzi on Unsplash

• Exchange token is a cryptocurrency that is native toward a certain crypto exchange and was created by the company that run that crypto exchange. There are also some exchange token that was pegged to a certain asset and as you might already know, every crypto that had its value to an asset is called a stablecoin. Some exchange token is also labeled as a utility token simply because it has a use case.
• I only point this out simply to tell you that not all crypto will fall into only one categories of cryptocurrency especially if it has a lot of use case in different scenarios.
• Now back to the topics, two of most popular exchange tokens is Binance Coin (BNB) and FTX Token (FTT). (FTX Token gain its popularity is simply because most people hate it and its connection with FTX, the fraud-ridden cryptocurrency exchange)
• In term of its use case or usage, exchange token can be use by trader or investor that use a certain exchange to pay for deposit and withdrawal fees.
• It also enable trader and investor to have a voting rights on a certain exchange especially in determining what is the best thing to do for a crypto exchange future (This one has a lot of connection with governance token, so just wait for my next article where I will explain about governance token).
• Exchange token also contain a lot of issues especially relating to the exchange company that created it. One of its main issue is every time the exchange company run into some sort of problems (especially a big one) and they fail to solve it, the failure in solving that problem will be reflected on the price of the exchange token that was native with that company.
• I will explain it like this, exchange company run into a problem, they fail to solve it, FUD start to kick in among the investor, they start to lose trust with that exchange, they start selling all of their crypto portfolio in that exchange, they also start to sell all of their exchange token that they hold, price of the crypto exchange start to go down and finally that crypto exchange run into liquidity issues (Worst case scenarios).
• But most of the time, it will not be that bad because most of the problem is solvable even though it might take a while and also most of the time if a certain exchange token does go down, it might be because of the exchange company problem with the law itself. Best example for this is the FTX collapse, the exchange company that was found to be doing shady and fraud activity using investor money.
• So if you want to invest your money on an exchange token, please find an exchange token that had a proper exchange company behind it and doesn’t have a shady or questionable reputation. Also please make sure that crypto exchange is regulated by your country local regulator. (This is not a financial advice…Seriously this is not a financial advice, go do your own f*cking research).

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