How Profitable Are the World’s Top Crypto Exchanges?
As estimated by Bloomberg financial experts, the top ten largest cryptocurrency exchanges are amassing a whopping $3 million in profit per day. Acknowledging the fact that digital currencies did not even exist until mid-2009, profit at that level is utterly startling as opposed to the historical development of other industries.
It is easy enough to understand how crypto exchanges make money –by charging fees for users who sell, buy, and withdraw digital assets. However, there are a few various essential stats and trends that can help us to understand why some exchanges enjoy more cryptocurrency profitability than others.
Where are the world’s top exchanges located?
Cryptocurrency exchange platforms based in Asia are ruling the global crypto trading industry. It is estimated that both Binance and OKEx (based in Tokyo and Hong Kong respectively) pull in over 1.7 billion dollars daily in trading. Regarding volume, Huobi (Singapore), Bitfinex (Hong Kong), Upbit (South Korea), and Bithumb (South Korea) are right behind these two. Research conducted by financial market experts also revealed that 50% of global daily crypto trading is carried out on Asia-based exchanges. However, a recently declared crackdown by Hong Kong’s SFC (Securities and Futures Commission) could indicate the start of a shift away from Asia if investors and exchange founders become more cautious of the viability of exchanges headquartered in such area. Hong Kong is not the only place growing less friendly to crypto exchanges.
Heightened scrutiny in China, Japan and elsewhere led Binance to lately announce that it will extend its services to Malta, where the company will render a fiat exchange option. This is a tactic which will not only aid Binance in complying with regulations but could also expand the geographic range of the exchange’s user base.
Why are Asian exchanges so popular?
Generally, when most people think of the most prominent tech giants, some names come to mind–Google, Amazon, and Facebook for instance.
These companies are all based in the United States. However, with the top cryptocurrency exchanges in terms of trading revenue per day, there is an evident inclination towards Asia as the prevailing continent for crypto exchange services headquarters. Zhuling Chen, co-founder of Aelf indicates various factors for the prevalence of Asian-based exchanges. Some of the most significant include:
- Low costs of cryptocurrency mining: energy costs have made many countries in Asia centers for miners, fueling growth since the early days of digital assets.
- A well-established economy based on mobile payment methods: some mobile apps such as WeChat, and AliPay, are used for both C2B (consumer-to-business) and P2P (peer-to-peer) payments daily.
- Gaming Culture: young people are accustomed to using tokens in video games as prizes which hold value. Gaming has helped to imbibe the notion of tokenization and token trading from an early age. Many see digital assets as the next step in the evolution of tokens.
Will the current top ten exchanges remain profitable in the future?
While there hasn’t been any specific answer to this yet, the crypto exchange platform market is undeniably getting more competitive daily, as the cryptocurrency exchange list keeps getting longer. Robinhood (US), for instance, hopes to become the best crypto exchange platform by rendering crypto-to-crypto tradings free of charge. Other top platforms such as Binance have yet to reduce their fees to compete. Nonetheless, many exchanges are discovering innovative ways to adapt to the market’s evolving landscape swiftly. Here are some examples of what Binance and some other top tier exchanges are doing to remain relevant.
- Decentralization: Most, if not all cryptocurrency exchanges are expected to become 100% decentralized soon. This move is perceived as a way to shift monetary authority from exchanges services to their clients. It is also seen as a more reliable option.
- Fiat-to-crypto: A handful of exchanges like Binance and KuCoin do not currently offer fiat-to-crypto trading due to the time it takes to create ties with conventional banks. Now, however, many exchange services that only deal with cryptocurrencies and not fiat currencies are looking to spend the time needed to establish these connections and overcome regulatory difficulties.
Incentivising investments: On several exchange services platforms, there are prize raffles for users purchasing tokens that are newly launched. Binance has a common protocol of doling out luxury cars, as it did during this recent Maserati + Mercedes-Benz Giveaway, or awarding large sums of bonus tokens.
Will high volume trading continue?
While it’s unquestionably far too early to tell how much price volatility will affect crypto trading volumes and crypto exchange revenue in 2018, the success of ICOs fundraising so far this year could serve as a positive sign of the sustained profitability. The blend of innovative user procurement strategies and overall increases in the number of listed cryptos will likely help many of the top exchange services remain active in their quest to become the best crypto exchange and thereby increasing profitability.