When most people think of cryptocurrencies, one of the first things that come to mind is token price. After all, the crypto market is known for its often-volatile price swings and one of the great excitements of the industry is watching and speculating on the price of different tokens. 

Behind all this excitement, however, is the process of token price discovery. In fact, it is hard to picture the crypto sector functioning at all without price discovery. 

Coin and Token Creation

These days, it is easier than ever to create your own cryptocurrency or token. Whether a crypto entrepreneur is creating a token from scratch or using a token generator, cryptocurrencies can now be created for different functions. 

These include tokens for commercial use, community tokens, utility tokens, novelty tokens or even all of them combined! But as these tokens are created, there is the need for them to have an established price and marketplaces are the perfect place for that to happen. After all, cryptocurrencies are meant to be bought and sold and there is no way for price discovery to actually happen without a market.

What is Price discovery?

Simply put, price discovery refers to all the mechanisms that determine how much a token should be sold in the market. This process is very important because it ensures some sort of order in the market. 

After all, anyone could release a token a claim that it is worth $100,000 for a single unit. With a price discovery process, both crypto entrepreneurs and crypto buyers are treated more fairly. 

So, how does price discovery work? 

It works by determining supply and demand for a token and through this, a balance is formed. The supply and demand for the token, however, is determined through price discovery tools that allow the buyers and sellers to match. The tools also do much of the work in value tracking and calculating and crypto exchanges or white-label crypto software are the best tools around for this job.
What are some of the crypto tools for price discovery?

Crypto Creation Tools & Launchpad Protocol

Before price discovery can happen, the token itself needs to exist. Luckily, creating your own token is quite easy these days. With sites like CoinTool or pinksale.finance, you can create your own token on the spot. You can even use a white-label exchange to create your token which does not require any blockchain transaction initially.

These allow you to specify what type of token you want to make, what its features will be, and set up a presale with an exchange rate you can set yourself. After your are all set up your dashboard will provide information on the value of the token and updates on who has purchased it at any given minute. 

Unfortunately, these launch pads require that your user do a blockchain transaction which can be a bit of a barrier to entry. They also don’t do a very good job of price discovery because the prices are rather static. For more dynamic prices that adjust on demand you will need an exchange with an orderbook.

Crypto Exchanges

These are the platforms that most people are familiar with when it comes to buying and selling their tokens. They follow the standard email login that most users prefer. Crypto exchanges allow the buying and sell of tokens through an orderbook which does a much better job of price discovery compared to a launchpad. 

For a crypto entrepreneur, having your token listed on a crypto exchange is very important not just for price discovery but for legitimacy and accessibility as well. There is the option of either applying for your token to be listed on an exchange and following their laid-down guidelines or creating your own.

Another way is to start your own exchange with white-label blockchain software tools like HollaEx. With HollaEx, you can design your own cryptocurrency exchange in minute and once done you can list your own coins and tokens as you see fit. This not only means that you can bypass the often-long process of getting your token listed on a third-party exchange but you can also control and monitor the supply of your token more closely as well as branding. 

After this is done, your token value will begin reporting based on the market’s response to it. 

Why Price Discovery is Needed 

While it has been established that token price discovery is needed to have some order in the industry, it also has many benefits for crypto entrepreneurs. More specifically, crypto entrepreneurs that want their tokens listed on sites like CoinGecko and CoinMarketCap would need a long and reliable historical record of price discovery and there is no better way to do that than having your token traded on a crypto exchange. Presale platforms won’t cut it. 

This is because such high-profile sites require tokens to reach certain level of market maturity before they can be listed and one of these is having some sort of independently-verifiable price discoverability. Simply put, CoinGecko isn’t going to just take your word that your token is worth a certain price, it will request crypto exchange APIs and the price data to prove it.

Instead, it needs an independent mechanism that will inform them of how much your token is worth at any given time. Exchange’s just happen to be the best place for that.

Conclusion 

Price discovery is a tricky process because of the multitude of platforms that have to be actively reporting the value of a token for a general price to be established. However, one way to retain some control of the process is to have your own crypto exchange. 

By doing this, you are able to better manage the circulation of your token in the market and this, in turn, means that your token can see more demand and a higher price. In the complicated process of crypto price discovery, this also represents some level of control for an entrepreneur that will make better business sense as the token, exchange and platform mature.

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Cryptos feed Join Telegram

Recommended content


Recommended Content

Editors’ Picks

Bitcoin Weekly Forecast: Assessing likelihood of 80% rally for BTC before 2023

Bitcoin Weekly Forecast: Assessing likelihood of 80% rally for BTC before 2023

Bitcoin price action over the last 72 hours indicates that a massive bullish move is coming. In the last two articles, we have taken a look at why this is possible from a technical and on-chain perspective. 

More Bitcoin News

Luna Classic price: Binance burned 6 billion LUNC, triggering massive rally in the altcoin

Luna Classic price: Binance burned 6 billion LUNC, triggering massive rally in the altcoin

Luna Classic (LUNC) price witnessed a massive spike on Friday, after yielding 12% gains overnight. The move came after the world’s largest crypto exchange, Binance announced it would be burning 6.39 billion LUNC tokens. 

More Luna Classic News

Binance native token BNB and staking derivatives bleed after $5 million DeFi exploit on Ankr Protocol

Binance native token BNB and staking derivatives bleed after $5 million DeFi exploit on Ankr Protocol

Binance’s native token BNB suffered a 3% decline in response to the $5 million exploit on DeFi protocol Ankr Protocol. The BNB chain-based protocol confirmed that it has fallen victim to a multi-million dollar exploit. 

More Binance Coin News

Cardano price gets underpinned, could move 10% north before New Year

Cardano price gets underpinned, could move 10% north before New Year

Cardano (ADA) price action is trading in more quiet waters as the spillover effects and aftermath of FTX and BlockFi bankruptcies are finally easing into the background. 

More Cardano News

Bitcoin Weekly Forecast: Assessing likelihood of 80% rally for BTC before 2023

Bitcoin Weekly Forecast: Assessing likelihood of 80% rally for BTC before 2023

A massive bullish move is coming. In the last two articles, we have taken a look at why this is possible from a technical and on-chain perspective. In this weekly forecast, we will take a look at Bitcoin’s monthly performance for the last decade and determine if this bullish outlook is possible. 

Read full analysis

BTC

ETH

XRP