Coin Exchanges Projected to Clear $4 Billion From Crypto Trading Activities in 2018
When it Comes to Coin Exchanges: The House Always Wins, as Their Revenues May Double in 2018
Cryptocurrency trading is making its mark on the investing world, and it's not that hard to see its upward progression in such a small window of time as one year. For example, the buying and selling of cryptocurrencies in 2017 generated revenues of $1.8 Billion in transaction fees.
Breaking that into percentages, those transaction fees equate to 8% of the total revenue raked in by coin exchanges in that same year. Sounds like a high watermark for Crypto?
That's until you see just how much it's dwarfed by annual returns in 2018. According to CoinMarketCap, the total aggregate market capitalization of all digital tokens surged speedily ahead; increasing from $17.7 Billion in 2017, to $218 Billion as of August 2018.
So what's the result of having a monumental explosion in the market cap going to have on the market as a whole? Well, for starters, with a larger market cap comes the improved chances that more people will invest, buy and sell their assets, equalling more transaction fees.
And transaction fees? They're a breadwinner for crypto coin exchanges. In case you are curious to know the makeup of the transaction fees, below is a breakdown of the major classes of transaction fees.
This refers to the commission that's paid to the exchange to complete any buy or sell orders.
This fee may fluctuate depending on the exchange, but in order to improve the competitiveness of specific exchanges, this usually results in a fixed-fee format. In some crypto exchanges, the maker-taker model is used where the fee varies depending on the trading activity.
Network fees refer to the fee paid to the various cryptocurrency miners as a system of incentive for their current rate of activity. These are the people responsible for verification and validation of transactions before being added to the blockchain.
These cryptocurrency exchanges may, at their own volition, decide to charge a higher network fee than other exchanges in order to net themselves some profit.
As the name suggests, wallet fees are the charges users pay to the provider of their wallet. These fees help the wallet provider cover costs such as development costs, regular updates, and crypto storage services.
Clients that represent major companies are very likely to pay a much higher premium for dedicated services from wallet providers.
The Rise in Crypto Trading Activity
So when it comes to fees, including these other types of fees which can be included, the amount that exchanges and providers can make increases dramatically. According to extensive research compiled by the news outlet Bloomberg, the current trading volume of the top ten cryptocurrencies amounts to transaction fees of over $3 million daily.
Since the revenue comes from the increased trading activities on crypto exchanges, it helps to know why these markets are increasingly bullish. Similar reports come from BTCManager as of July 2018, that Binance is in the position to rake in over $1 Billion across the year.
What this shows above anything else, is that regardless of the cryptocurrency market and its performance, the cryptocurrency coin exchange ‘house' always wins.
The cryptocurrency market, save for the global cash and equity markets such as US and European equities, continues to shine amongst its rivals. As a result, the more hawkish of investors are drawn to the high risk and high reward market that is crypto.
Blockchain technology continues to prove itself as a powerhouse when it comes to disrupting the old order. Acting as a decentralized platform which, effectively, renders third-party companies obsolete. And as it is the power behind the throne of cryptocurrencies, Coin exchanges adore it because it cuts costs and maximizes revenue.
Even while the crypto market remains a diverse and highly active one, there are always going to be investors that will be risk-averse, putting the brakes on major bull runs. But who can blame them? For many cryptos, prices remain volatile and government regulations (previous examples withstanding) cash a dark cloud over proceedings. An example? Bitcoins soar and crash of December 2017, where it saw a peak of $20,000 only to be slashed by $20,000
One of the giants of the crypto coin exchange world is certainly Coinbase, the San Francisco-based exchange which took to investments, accelerator programs and venture capital is a shining example of the power of exchanges.
According to recent findings, Coinbase accounts for just about 50% of all transaction fee revenue coming from exchanges. The recipe for its success? It has branched out to become more than just an exchange.
Should the cryptocurrency market, in general, manage to continue on this global scope of rapid growth, it has the makings of an asset class that will overshoot anything that's come before it.