2018 was a difficult year for all participants in the cryptocurrency market, but the worst was, perhaps, for cryptocurrency exchanges. The main income of exchanges is commissions from trading operations and listing fees. With a stagnating market, low quality projects and sad moods in the market, only the strongest will survive. Today we will tell you about the trends of the exchange market and important factors that should be taken into account in order to stay afloat..
The first and, perhaps, the key trend is the increasing competition between exchanges. Today, all exchanges, without exception, are trying to maintain trading volumes and cover most of the market. Coinmarketcap recently noted in its research that in 2018 it received more applications to add new exchanges than to add new cryptocurrencies..
Against the background of reports of the closure and bankruptcy of small exchanges (Ukrainian Liqui, British Cubits), Japanese giant companies began buying cryptocurrency trading platforms that had been hacked in order to ensure their entry into the crypto market. For example, Coincheck was acquired by the former director of Goldman Sachs and CEO of Monex Oki Matsumoto for only $ 34 million. for $ 44 million.
An active localization of exchanges can be considered a trend associated with tougher competition: Huobi launches Huobi Russia, however, the exchange does not plan to add the Russian ruble, EXMO entered the Turkish market – added the Turkish lira, language support for the website and support, and plans to open a physical office there. Binance is going to conquer Malta, South Korea, Liechtenstein and Singapore, KuCoin is planning the expansion of all Spanish-speaking countries (Spain and 18 more Latin American countries). Gemini is heading to Asia, while Coinbase has already started operating in Europe.
Access to physical delivery futures
Although absolutely everyone is tired of analytics and forecasts on the topic of access to futures, this is perhaps the most important event in the industry. More than ever, the market is waiting for the launch of the Bakkt platform, which will open up access to futures with physical delivery of bitcoin. It is expected to attract institutional players to the market and significantly influence the entire market. The site will not support margin trading, and all transactions will be fully backed by assets.
Bakkt is created by New York Stock Exchange (NYSE) operator Intercontinental Exchange (ICE) in partnership with Microsoft, Starbucks and BCG.
There are other enthusiasts on the topic – a number of large Wall Street firms are about to launch an exchange — ErisX, which provides access to futures with physical delivery of not only bitcoin, like Bakkt, but also other cryptocurrencies: Ethereum, Bitcoin Cash and Litecoin.
Tightening of state control and verification
Despite the fact that deanonymization, personification and regulation completely contradict the very idea of cryptocurrencies, the fourth trend will be the tightening of state control and verification on exchanges..
On the Russian market, perhaps the main exciting event was the criminal case against Dmitry Vasiliev, CEO of the WEX cryptocurrency exchange. In Korea, only 7 cryptocurrency exchanges have been verified by the government (out of 38), and the heads of the Komid exchange received prison sentences for falsifying trading volumes of $ 45 million. The CEO of the Romanian cryptocurrency exchange CoinFlux Vlad Nistor was detained at the request of the US Department of Justice on charges of fraud, cyber crime, money laundering and extortion.
All exchanges treat regulation differently, with Kraken saying government control is holding back the cryptocurrency business. CEX and OKEx have introduced mandatory verification to meet «5th Anti-Money Laundering Directive» European Union (EU) laws «Know your client» and «Anti-money laundering» (KYC / AML). The most active traders are now required to pass verification on Localbitcoins, and the owner of legacy accounts must go through the KYC procedure on Poloniex.
Some exchanges in such conditions generally try to change their shoes in flight: the IDEX decentralized exchange suddenly recognizes itself as non-decentralized, introduces forced verification for users and blocking users from Syria, Crimea, Washington and Cuba. As a reason for establishing mandatory KYC procedures, the exchange cites a statement by the member of the Commodity Futures Trading Commission (CFTC) Brian Quintens that developers can be held liable for illegal transactions carried out by third parties using smart contracts they have written..
Asset insurance and security enhancements
Holes in the security of exchanges and wallets in 2018 provided hackers with mining of $ 854 million (and this is only if we take into account 10 reliably identified and major incidents). That is why the next trend is to insure users’ assets and attract the best market specialists to strengthen the security of exchanges..
The Gibraltar Blockchain Exchange (GBX) and Gemini have insured assets on the exchange’s online and offline wallets. Coinbase has confirmed the recent move of $ 5 billion worth of crypto assets to the updated storage. South Korean exchange Bithumb and Upbit have received ISMS certification from the Korea Internet and Security Agency (KISA). Binance partners with CertiK to offer security services for various blockchains.
An interesting fact was the interest of exchanges in IPOs (a few years ago, most market participants criticized IPOs as an outdated and too difficult way to attract investments).
A kind of reverse IPO was decided by the EXMO cryptocurrency exchange: the Canadian public company GoverMedia Plus Canada Corp. received the exclusive rights to negotiate the purchase of the exchange for 180 days. If the deal goes through, the combined company will continue to do business under the EXMO brand and will be listed on the Canadian Stock Exchange (CSE).
The Blockchain Exchange Alliance (BXA), which controls the holding of BTHMB, the operator of the Bithumb crypto exchange, and the over-the-counter US public company Blockchain Industries (BCII) have signed a letter of intent to conduct a reverse merger. The Kraken exchange is considering the possibility of a private placement of securities, which it informed its largest clients by letter. The placement will be carried out when the company is valued at $ 4 billion.
We also recommend that you learn about how Intel, Samsung and AMD will affect mining in 2019..