When most people think of cryptocurrencies, one of the most prominent aspects that comes to mind is the pricing of tokens. After all, the crypto market is known for its often volatile price swings, and one of the great excitements of the industry is the observation and speculation of the value of tokens.
These token prices are integral to the crypto world, but it can be unclear to many how any given token begins the journey of its changing value. Behind the scenes is the process of ‘price discovery.’
The meaning of this term may be unfamiliar to many, but without it, it is hard to imagine how the crypto industry would function at all. This article aims to briefly introduce this term and then how entrepreneurs can utilize this price discovery mechanism to their best advantage in creating new coins.
That said, here is everything you need to know about how to create a crypto token.
Coin and token creation
These days, it is easier than ever to create a cryptocurrency. Whether a crypto entrepreneur creates a token from scratch or uses a token generator, these new cryptocurrencies are created for various functions.
These functions include commercial tokens, utility tokens, novelty tokens, etc. The tokens need to have an initial established price within the market. After all, cryptocurrencies are meant to be bought and sold, which is impossible without the initial value set by the price discovery process.
What is price discovery?
Price discovery refers to the mechanisms that determine the value of a token. Typically a market with traders buying and selling helps determine the token’s value.
One problem today is that anyone can create a token and make a spurious claim that the token is worth $100,000 per unit. Both crypto entrepreneurs and crypto buyers should appreciate what was bought and sold and not the price displayed on the screen.
So, how does price discovery determine the correct price? Simply put, the buyers and sellers set prices. The sale data is then used to draw price charts. There are various ways to put your token up for sales, but first, you got to create a coin.
Crypto creation tools
For price discovery can happen, of course, the new token itself needs to exist. Fortunately, new tokens have been made simple through sites such as CoinTool, which can create tokens on the spot.
These sites allow specification for the type of token to be created and even include a launching mechanism. Launchpads are helpful for the initial token distribution and have some limited price discovery mechanisms.
Typically coin and token launchpads are the first step for most crypto projects but aren’t sufficient for real price discovery because they don’t handle dynamic pricing as well as a crypto exchange with an order book and live price charts.
Exchanges are the platforms that most people are familiar with when buying and selling tokens. Crypto exchanges do the best job in for coin and token price discovery process. Some exchange software kits even allow for the coin creation process and will handle the token’s launch.
But for most crypto entrepreneurs, simply listing on a third-party crypto exchange is perhaps the most convenient way to improve the legitimacy and accessibility of a newly created token. But little do some know there are two options.
- Applying for the token to be listed on an existing exchange.
- Start your crypto exchange and list your token on it.
Instead, coin and token creators can launch an exchange and control the coin listing themselves in the second option.
Tools like HollaEx can achieve this latter option. With HollaEx, cryptocurrency exchanges can be designed and deployed in less than an hour and quickly have custom-made tokens listed.
HollaEx allows token creators to bypass the often lengthy process of getting tokens listed on a third-party exchange and allows the control and monitoring of the supply of the token more closely.
Why is crypto price discovery 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. Crypto entrepreneurs that want their tokens listed on sites like CoinGecko and CoinMarkeCap require price discovery.
High-profile sites require tokens to reach specific requirements before they can be listed, one of these requirements being some form of independently-verifiable price sources and volume. If the token has no trading volume, it is little chance to be listed on these popular crypto price websites.
CoinGecko will not take anyone’s word that a token is worth a specific price unless there is live exchange data and APIs to access the data.
Price discovery is a tricky process because of the multitude of platforms that have to actively report the value of a token for a general price to be established.
However, a suitable method for issuing a new token to retain some control of the price discovery process is to have control over the actual exchange itself that the token is listed on.
Through this method, you can better manage the circulation of your token within the market, which means that custom new tokens can see greater demand and, thus, a higher price.
In the complicated process of crypto price discovery, this also represents some control for an entrepreneur.