The short answer is: They want to test the waters. Futures often face fewer legal restrictions than spot trading.
Leverage trading generates more fees and liquidations, so there are higher profits for the exchange. Exchanges gauge interest before committing to full Spot support. Futures allow speculation without requiring actual $KAS currency.
The long answer is far more nuanced. Here are some explanations as well as some helpful articles that help shed light on this common question.
The Game Behind Memecoin Listings: Why Futures First, Spot Later? (Read this article to discover the mechanics behind coin listings on major exchanges like Binance and Kraken. Learn why some coins get listed on futures before spot, the challenges memecoins face, and strategies for navigating this volatile market.)
Crypto Spot Trading vs Crypto Futures Trading: Differences Explained (Read this article to learn some fundamental differences between spot and futures trading. This describes the financial incentive for perpetual futures. The exchange makes money no matter what and could liquidate your position on paper (synthetic, unbacked asset).
Crypto Spot vs. Crypto Futures Trading: What’s the Difference? (Read this Binance Blog article to learn the difference between the two.)
Perpetual Futures: What They Are and How They Work (Read this Investopedia article to learn…)
Video Explanations:
Futures Trading vs. Spot Trading (Everything You Must Know)
Spot vs Futures trading. What’s the difference in crypto trading?
What is the difference between cryptocurrency spot trading and futures trading?
Bitunix Guide to Spot and Futures Trading Differences
Understanding Spot vs. Futures Listings
Spot Listing:
Investors directly own the token and can withdraw it from the exchange. Spot trading creates real demand and reduces circulating supply, increasing token scarcity and potentially driving up the price.
Futures Listing:
Investors trade contracts based on the token’s price rather than owning the token itself. While futures trading generates volume and interest, the funding rate often limits sustained price increases.
Key Difference:
Spot listings create tangible demand by locking up tokens, whereas futures listings focus on speculative trading.
Why Futures Listings Come First:
Risk Mitigation for Exchanges:
Trading can be emotionally taxing, especially in a volatile market. Having a solid risk management plan can help traders stick to their strategies and avoid impulsive decisions driven by fear or greed. Cryptocurrencies are known for their high volatility, which can lead to significant price swings in a short period. This unpredictability can result in substantial losses for traders if not managed properly. Many futures contracts allow traders to use leverage, meaning they can control a larger position with a smaller amount of capital. While this can amplify profits, it also increases the potential for losses, making risk management essential.
The crypto market can be susceptible to manipulation due to its relatively low liquidity compared to traditional markets. This can lead to sudden price changes, necessitating strategies to protect against unexpected movements. In futures trading, there is a risk that the other party in the transaction may default. Effective risk mitigation strategies help to minimize this counterparty risk. The regulatory environment for cryptocurrencies is still evolving. Changes in regulations can impact market conditions, making it important for traders to have risk management strategies in place.
Liquidity Testing:
Exchanges use futures markets to gauge demand, liquidity, and stability for a token before committing to a spot listing.
Volatility Management:
Memecoins are notoriously volatile. Futures markets allow exchanges to test market resilience without the complexities of managing token withdrawals.
Operational Complexity:
Spot listings require exchanges to manage wallet integrations for deposits and withdrawals, which can be challenging for tokens with unique technologies (e.g., DOG on Bitcoin Ordinals or Rune Protocol).
Why Listing on Binance is Challenging for Some Coins :
High Listing Costs and Listing Fees:
Binance may demand up to 8% of the token’s total supply as a listing fee.
Refundable Collateral:
Projects often need to stake $5 million in BNB as collateral, refundable only if the token is delisted.
Marketing Budget:
Projects must allocate an additional 8% of their supply for promotions like airdrops and platform marketing campaigns. In total, projects need to allocate up to 16% of their total supply, plus a significant upfront financial commitment. This creates a substantial barrier for most new coins, particularly those with decentralized ownership.
Decentralized Tokenomics:
Memecoins like DOG often distribute tokens across hundreds of thousands of wallets, making it nearly impossible to meet the 8% token supply requirement for Binance’s listing criteria.
Centralized Teams:
In contrast, Solana-based memecoins often have centralized teams that retain a portion of tokens specifically to meet exchange requirements. Kaspa is not centralized and does not pay for listings.
Liquidity Concerns:
Memecoins often experience FOMO-driven trading, leading to sharp but short-lived trading volume spikes. Binance prioritizes projects with stable, sustainable liquidity to ensure long-term trading activity.
Perpetual Contracts:
Perpetual contracts are what you will see across different cryptocurrency exchanges. A Perpetual future contract is also known as a perpetual swap. It is the most popular crypto derivative out there. Crypto future contracts are perpetual swaps that don’t have an expiry date. You can keep your positions open for as long as you wish to. However, you will be required to pay holding fees or the funding rate. Also, your crypto account must contain a minimum amount known as a margin. Plus, apart from the funding rate, you also have to trade fees.
