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Primary vs. secondary markets: Key differences

March 15, 2023 Coin Telegraph

Primary and secondary markets differ in securities, pricing, risk, volume, liquidity, timeframe and more.

Stock and crypto markets are essential components of the global financial system. These markets provide a platform for investors to buy and sell financial assets, which helps companies raise capital for investment and growth. Moreover, the stock and crypto markets play a crucial role in determining the value of an asset. The market price of a stock or cryptocurrency reflects the collective sentiment of investors about its prospects, which can impact its future growth potential.

Lastly, the stock and crypto markets can be used as indicators of broader economic trends and sentiments. For instance, swings in the stock market can indicate changes in investor perceptions of the health of the economy, whereas moves in the cryptocurrency market can be caused by changes in the law, developments in technology or changes in consumer tastes. Investors can learn more about the state of the economy, potential hazards and investment possibilities by keeping an eye on these markets.

Types of markets

The primary market and the secondary market are the two main categories of markets.

Companies first offer new securities to the public on the primary market, including stocks, bonds and other financial instruments. The primary market’s goal is to help the issuer, whether it be a business, a governmental body or another group, raise money. These securities can be bought directly from the issuer by investors, with the money going to the issuer.

On the other hand, previously issued securities are traded between investors on the secondary market. Instead of purchasing securities directly from the issuer, investors buy and sell securities that have already been issued in this market. The secondary market provides liquidity to investors, allowing them to buy and sell securities quickly and easily. This market is also important for price discovery, as the price of a security is determined by supply and demand factors.

In the cryptocurrency world, the primary market is where new tokens or coins are first offered to the public through initial coin offerings (ICOs) or initial exchange offerings (IEOs). The secondary market, on the other hand, is where previously issued cryptocurrencies are traded among investors. An example of the secondary market in crypto is the cryptocurrency exchange Binance, where investors can buy and sell various cryptocurrencies, such as Bitcoin (BTC), Ether (ETH) and others.

Buying and Selling

NFTs can be traded at a fixed price or through an auction.

Trading of NFTs always happens in 2 markets; the primary market (minting website) and the secondary market (NFTs marketplace).
— Henry Imani (@henryimani_) January 13, 2022

Primary vs. secondary markets

There are several key differences between primary and secondary markets.

Purpose

The primary market is where new securities are issued for the first time, while the secondary market is where previously issued securities are traded between investors.

Issuer

In the primary market, securities are issued directly by the issuer, whether it’s a company, government entity or other organization. In the secondary market, investors trade securities among themselves without involvement from the issuer.

Pricing

On the primary market, the price of a security is typically set by the issuer, based on factors such as market demand, supply and the company’s financials. On the secondary market, the price of a security is determined by supply and demand factors, with investors buying and selling based on their own perceptions of the value of the security.

Risk

The primary market carries a higher risk for investors, as the securities being issued are new and have not yet been tested in the market. In contrast, the secondary market carries a lower risk, as investors can evaluate the performance and stability of the security before deciding to buy or sell.

Volume

The primary market typically has a lower trading volume compared to the secondary market, as securities are issued on a limited basis. The secondary market, on the other hand, has a high trading volume, as investors buy and sell securities on a daily basis.

Liquidity

The primary market has limited liquidity, as investors cannot easily sell newly issued securities until they are listed on the secondary market. In contrast, the secondary market is highly liquid, as investors can buy and sell securities on an ongoing basis.

Timeframe

The primary market is generally open for a limited period of time, as securities are issued on a specific date or over a limited period. The secondary market, on the other hand, is open continuously, allowing investors to buy and sell securities at any time.

France on the verge of passing stringent crypto firm licensing laws

March 1, 2023 Coin Telegraph

Coin Telegraph

The bill was passed with a vote of 109 in favor and 71 against and will now rely on the approval of president Emmanuel Macron to be signed into law.

The French National Assembly has voted in favor of legislating stricter licensing rules for new cryptocurrency firms in order to harmonize local laws with proposed European Union (EU) standards.

The vote was passed with 109 votes (60.5%) in favor to 71 (39.5%) against. The French Senate has already passed the bill, which now goes to President Emmanuel Macron, who has 15 days to either approve it or send it back to the legislature.

✅ Projet de loi DDADUE dans les domaines de l’économie, de la santé, du travail, des transports et de l’agriculture | Adoption par l’Assemblée nationale, compte tenu du texte de la commission mixte paritaire.
En savoir plus ➡️ https://t.co/CDlQxPrs1b #DirectAN pic.twitter.com/PZ2uuC4MrS
— Assemblée nationale (@AssembleeNat) February 28, 2023

If passed, the new law would oblige France-based cryptocurrency service providers to comply with stricter anti-money laundering rules, show that customer funds are segregated, adhere to new guidelines on reporting to regulators and provide more detailed risk and conflict of interest disclosures as a means to strengthen consumer protection.

The contents of the bill would not, however, apply to the 60 crypto firms registered with the Financial Markets Authority (AMF), the nation’s financial regulator. These firms will continue to comply with the AMF’s rules until the likely passing of the EU’s own crypto regulations with the Markets in Crypto-Assets (MiCA) bill.

The stricter rules would therefore only apply to crypto firms that register from July onwards.

Among the 60-AMF registered companies include Binance, which recently began piloting in-store payments in France with the cloud-based payment platform Ingenico via Binance Pay.

Crypto payments just got easier in France

We've recently partnered with @ingenico, a global payment solutions provider, to enable users to pay in crypto through #Binance Pay.

Another milestone for global crypto adoption pic.twitter.com/S8f8Pab7nW
— Binance (@binance) February 22, 2023

The legislative push for stricter licensing rules was initiated by Hervé Maurey, a member of the French Senate’s finance commission, who in Decemberproposed an amendment to eliminate a clause enabling crypto companies to operate without a full license until 2026.

Bank of France governor, Francois Villeroy de Galhau, also pushed the agenda in a Jan. 5 speech to members of the finance sector in Paris.

Like many regulators around the world, Villeroy de Galhau cited the need to respond to the recent turmoil in the cryptocurrency market as the motive behind the bill, which he wants to come into effect “as soon as possible.”

While MiCA will likely serve as the blueprint for cryptocurrency market regulation in the EU, he added that France simply couldn’t wait around for the more comprehensive laws enacting the licensing regime on digital asset service providers..

The EU is set to finally vote on MiCA regulation in April after two postponements. A successful outcome would likely see the highly anticipated crypto laws come into force sometime during 2024.

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FTX customers are safe from being doxxed, for now

January 12, 2023 Coin Telegraph

Bankruptcy Code

The decision comes after a Jan. 8 filing by FTX’s lawyers, who argued that public disclosure could create an undue risk of identity theft or unlawful injury to FTX creditors.

The names of up to nine million FTX customers are set to remain confidential for at least three more months following the latest ruling in FTX bankruptcy proceedings.

The decision was reportedly made by Judge John Dorsey in the Delaware-based bankruptcy court on Jan. 11 in response to a 168-page filing by FTX on Jan. 8, which requested the court to withhold confidential customer information.

Judge Dorsey said that he remains “reluctant at this point” to disclose the confidential information, as it may put creditors “at risk,” despite increased pressure from several media outlets:

“We’re talking about individuals here who are not present – individuals who may be at risk if their name and information is disclosed.”

Days earlier, FTX lawyers argued “that disclosure of the information would create an undue risk of identity theft or unlawful injury to the individual or the individual’s property” and that the court should use its “broad discretion” under the U.S. Bankruptcy Code to protect those affected by FTX’s collapse.

In late December, a group of non-U.S. FTX customers also pushed the Delaware bankruptcy court to keep customer information private, arguing in a Dec. 28 joinder filing that public disclosure would cause “irreparable harm.”

Judge Dorsey’s decision does however run contrary to most bankruptcy proceedings where creditor information is disclosed — which is what happened in cryptocurrency lender Celsius’ bankruptcy proceedings in October.

The Delaware-based bankruptcy court hasn’t been as kind to FTX equity holders, having released a Jan. 9 document that disclosed the investors expected to be wiped out and the number of shares they held with FTX.

Among those included NFL legend and former FTX brand ambassador Tom Brady, his ex-wife Gisele Bündchen, tech entrepreneur Peter Thiel and Shark Tank investor Kevin O’Leary.

It appears that progress is being made though, with FTX reported to have already recovered $5 billion in cash and cryptocurrency, FTX attorney Andy Dietderich said in a Jan. 11 statement.

According to early bankruptcy filings in November, more than 1 million creditors were speculated to be involved, with $3 billion being owed to the 50 largest creditors alone.

Only 1% of people can handle crypto self-custody right now: Binance CEO

December 15, 2022 Coin Telegraph

BUSD

Changpeng Zhao’s comments come as billions of dollars of stablecoins continue to flow out of the Binance exchange.

Binance CEO Changpeng “CZ” Zhao has cautioned the crypto community about self-custody, suggesting that 99% of people choosing to self-custody their crypto will likely lose it one way or another.

CZ has been been a supporter of self-custody for years, referring to its as a “fundamental human right” but has always urged users to “do it right.” He published a “CZ’s Tips” on self-storing crypto in Feb. 2020.

During a recent Binance-run Twitter Spaces on Dec. 14, the Binance CEO continued to urge caution for those using self-custody wallets — suggesting that more often than not, security keys are not stored securely, backed up or properly encrypted, commenting:

“For most people, for 99% of people today, asking them to hold crypto on their own, they will end up losing it.”

CZ reiterated that holding crypto in one’s own wallet is “not risk-free” and postulated that “more people lose money holding their own — lose more crypto when they’re holding on their own than on a centralized exchange.”

And we're live!

Tune-in to our Twitter Space where @cz_binance is answering all of your questions. https://t.co/U0hJOWy74P https://t.co/CDDC20cHgt
— Binance (@binance) December 14, 2022

“Most people are not able to back up their security keys; they will lose the device [...] They will not have the proper encryption for their backup; they will write it on a piece of paper, someone else will see it, and they will steal those funds,” he explained.

The Binance executive also stated that even where self-custody funds are properly managed, “if a person passes away, they don’t have a way to give to their next of kin,” but custodians like Binance can implement a “standard operating procedure” to solve that problem, he said.

The Binance executive concluded that “different solutions have different risk profiles” and that it is up to the user to decide what is best for them.

Despite most of Binance’s operations being “centralized,” CZ iterated that the company remained “neutral” on its preference towards custody and self-custody solutions, with the CEO stating in an earlier Twitter Space discussion on Nov. 14 that he’d happily shutdown the centralized cryptocurrency exchange if users moved to decentralized alternatives.

“If we can have a way to allow people to hold their own assets in their own custody securely and easily, that 99% of the general population can do it, centralized exchanges will not exist or probably don't need to exist, which is great,” CZ said.

Binance’s latest Twitter spaces comes amid a turbulent time for the exchange, which has seen significant withdrawals on concerns over its balance sheet and potential incoming litigation.

A Dec. 11 report from The Wall Street Journal suggested several red flags in Binance’s proof-of-reserves audit, while a Dec. 13 Reuters report suggested that the U.S. Department of Justice is nearing the end of a three-year investigation into Binance, which may come with criminal charges.

The last few days has seen a high volume of stablecoin outflows withdrawn from the trading platform, including $2.2 billion outflow of stablecoins Binance USD (BUSD), Tether (USDT) and USD Coin (USDC) over a 24-hour period between Dec. 13-14, according to data from blockchain intelligence platform Glassnode.

*Outflows of BUSD, USDT and USDC on Binance Over 24 Hour Period Dec. 13-14. Source: Glassnode.*

Interestingly, Bitfinex’ed — a long time Tether critic —shared a screenshot to its 98,000 Twitter followers on Dec. 14 of Binance’s latest offering 50% APR on staked USDT to its customers, alleging that the exchange may be looking to shore up its allegedly fast dwindling stablecoin reserves.

Binance now offering 50% APR on Tether fraud tokens. Binance appears to be desperately attempting to increase deposits.

First cloud mining scams now 50% APR rates on Tether fraud tokens!

H/t @Tethertothe1 pic.twitter.com/TZ0oPKxvss
— Bitfinex’ed Κασσάνδρα (@Bitfinexed) December 14, 2022

In the latest Twitter Space discussion, CZ attributed the weakened market sentiment — particularly with reference to custodial solutions — to the catastrophic fall of FTX.

SEC calls on firms to disclose exposure to crypto bankruptcies and risks

December 8, 2022 Coin Telegraph

Coin Telegraph

The Securities and Exchange Commission corporate finance division reminded companies of what they are required to disclose and provided guidance to what else they want to know.

The United States Securities and Exchange Commission (SEC) has issued new guidance that could see publicly traded companies disclose their exposure to crypto assets.

In a statement released on Dec. 8 by SEC’s Division of Corporation Finance, it said the recent upheaval in the crypto asset market has “caused widespread disruption in those markets” and noted that companies may have disclosure obligations under federal securities laws to disclose whether these events could have an impact on their business.

The SEC has also included an example letter that would be addressed to companies asking for additional disclosures about the company’s exposure to crypto bankruptcies, crypto asset volatility, and any other significant crypto market development.

The first question asks the company to provide disclosure of any “significant crypto asset market developments” that could impact the company’s financial condition, results, or share price, including the impact of the price volatility of crypto assets.”

Other questions ask the company to discuss how certain bankruptcies have impacted or may impact the business, including whether one has experienced “excessive redemptions or withdrawals” or to the extent that crypto assets are being used as collateral for loans.

It also asks the company to describe any material risks to the business from regulatory developments relating to crypto assets, or risks faced by the assertion of jurisdiction by U.S. and foreign regulators or other government entities over crypto assets and crypto asset markets

In the accompanying text, the SEC explained that it “selectively reviews filings […] to monitor and enhance compliance with applicable disclosure requirements.”

It noted that companies are already required to supply additional information as needed to avoid misleading it.

“In meeting their disclosure obligations, companies should consider the need to address crypto asset market developments in their filings,” the agency added.

The SEC has been gearing up for greater crypto oversight in recent months, opening new offices — an Office of Crypto Assets and an Office of Industrial Applications and Services — specifically for that purpose. The SEC and other agencies have come under fire recently for their lack of enforcement in high-profile cases.

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CrossTower eyeing further crypto acquisitions outside of Voyager bid

November 24, 2022 Coin Telegraph

Acquisition

CrossTower’s president said they would place extra emphasis on highly transparent and compliance-focused companies in light of the FTX collapse.

Crypto exchange CrossTower Inc., which is currently bidding for the assets of Voyager Digital, is reportedly window shopping for other crypto company acquisitions.

In a Nov. 24 Bloomberg report, CrossTower CEO Kapil Rathi revealed that the company is looking to pick up firms with a “good set of customers” and a “good balance sheet” despite the current bear market, stating:

“We’re in a great place to either acquire entities who have a good set of customers with them and a good balance sheet [...] so we are openly looking at different types of companies from an organic growth perspective.”

In September, CrossTower was one of the companies reported to be competing to acquire the assets of bankrupt crypto lender Voyager Digital, along with FTX and Binance.

FTX Trading eventually became the winner of the Voyager bid on Sept. 27 with the sale valued at $1.4 billion.

However, with the exchange filing for bankruptcy filing on Nov. 11, Voyager reopened the bidding process and a new revised offer came from CrossTower on the same day.

“We are working on a revised offer that we feel will benefit the Voyager customers and the wider Crypto community. CrossTower has always been, and will continue to be, very community-focussed,” a spokesperson told Cointelegraph at the time, without specifying an amount.

While CrossTower has still yet to disclose any details on its latest bid for Voyager, CrossTower president Kristin Boggiano stated that Voyager’s small $3 million FTX investment wouldn’t play a factor in a potential sale for the lending platform.

CrossTower also stated that it has “minimal exposure” to FTX-related investments.

Other companies back in line to buy out Voyager’s assets include Binance and blockchain-focused venture capital firm Wave Financial, who had also expressed interest in the initial auction for Voyager's assets in September.

In light of recent events with FTX, Boggiano stated that the firm has now placed an extra emphasis on companies that are highly transparent and compliance-focused.

“There’s an opportunity in this market to provide a compliance focused platform and to bring the transparency and trust that people have been hoping for.”

However, Rathi said the trading platform’s risk appetite to buy out companies has leveled off with the firm looking to adopt a slightly more cautious approach over the short to mid-term.

CrossTower is a United States crypto asset exchange that was founded in 2019. It's a relatively small exchange with only $103,816 in trading volume over the last 24 hours with 13 spot markets, according to Coinmarketcap.

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Risk

Types of markets

Primary vs. secondary markets

Purpose

Issuer

Pricing

Risk

Volume

Liquidity

Timeframe

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