Image source: Pixabay For a long time now, the airdrop has been the marketing tool of choice for projects wanting to generate some hype around their tokens. After all, everyone loves a freebie. In exchange for a retweet, joining a Telegram group or signing up for an email list, you can get a nice little package of new tokens delivered to your cryptocurrency wallet. Although this works to increase visibility, airdrops also have some drawbacks. Many users HODLing onto their free coins doesn’t help market cap by itself. To influence the price of the coin, some trading activity needs to happen. Therefore, for a blockchain project launching a new coin or token, the ideal promotion would be one that helps the project become visible to an active user base in the same way as an airdrop. At the same time, if a promotion can also help users recognize the value of holding the coin, and even better, provide an endorsement from a third party, then this promotion would be extremely valuable to any project. Enter the Trading Competition Trading competitions can be another effective way for a project to get some visibility around their new token. How it typically works is that a project and an exchange will team up to offer the project token as prizes in a trading competition. For the time that the competition is open, traders compete in trading the token to see who can get the best returns. The prizes are distributed to those who trade the most. Binance has already been running these kinds of trading contests for some time. They can be found in the announcement section of the website, detailing the contest dates and the rules. Several projects have participated over the last year or so, including Decentraland (MANA), Insolar (INS) and Paxos (PAX.) But do trading contests really have any sustainable impact on the value of a token? Taking INS as an example, it jumped the day before the Binance trading contest opened. However, by the time the competition closed, the value was lower than it had been before the initial jump. This is consistent with analysis performed by a blogger at Astral Crypto, who found the same pattern in many other tokens which had been involved in Binance trading contests. Pure token value aside, there are some fewer tangible benefits for a project participating in a trading contest, such as generating publicity and the endorsement value of a "partnership" with an exchange like Binance. However, the exchange may be gaining more benefit from trading competitions than the token. How Exchanges Benefit from Contests Exchanges are also in competition with one another for traders, because more trading activity means increased liquidity on the exchange and generates more exchange fees. So, a trading competition could help boost a coin up in the rankings, at the same time as helping an exchange also move to a higher-ranking position. Therefore, while many exchanges run trading competitions for newly listed coins, some exchanges also run competitions purely for the benefit of boosting trades. There are few statistics available that quantify the benefit to the exchanges. However, the value of the prizes on offer gives an indication of whether or not the contest is extending a worthy lure to traders. Where Traders Can Win Big This month, Trade.io is opening up a Valentines-themed contest called Love Trade, with some generous BTC prizes on offer for the winning traders. The top prize is 1.5 BTC – worth more than $5,000 at current trading value and worth significantly more if BTC recovers to its previous all-time high. Unlike some contests which only reward the very top traders, the Trade.io contest is distributing its prize kitty to the top fifty traders, with the lowest level of winners receiving 0.1 BTC. A wider prize distribution may provide a better incentive to draw in more traders as it offers a bigger probability of winning something. Binance, Bitfinex and Kucoin also runs regular competitions where traders can compete to win coins with some generous prizes. With prizes like these on offer, we can assume that the exchanges believe that trading contests are a worthwhile investment. With the prospect of winning crypto or tokens worth thousands of dollars, it’s likely that plenty of traders will agree.