Cryptocurrency Exchange Platforms are Now Increasing Trading Fees Due to Crashing Volumes
TradeBlock, a leading provider of cryptocurrency trading tools for institutional investors, has released its research report on April 4, 2019, detailing how the prolonged bear market that brought about declining trading volumes has also forced cryptocurrency exchanges to increase their fees.
Cryptocurrency Trading Crashes to 2 Year Low
According to TradeBlock, the bear market of 2018 remains one of the longest in the entire history of bitcoin (BTC) and other digital currencies.
In 2017, the price of bitcoin hit an all-time high of nearly $20K, before crashing all the way down to just above $3k in 2018 and the flagship cryptocurrency has managed to recover to $5,000 at press time.
TradeBlock notes that trading volumes have decreased significantly in a vast array of crypto exchanges in the United States since 2018 and early 2019, in unison with prices.
The firm has revealed that monthly trading volume at US exchanges began declining in 2018 but spiked significantly in November when a sudden crash in the price of bitcoin triggered increased trading activity, before slumping to a two year low earlier in March 2019.
Exchanges Listing More Digital Assets
Reportedly, as bitcoin trading volumes crashed, crypto exchanges have resorted to adding support for more alternative digital currencies, in a bid to drive greater trading activity and cushion the adverse effects of the crypto winter.
For instance, Coinbase, a leading U.S-based cryptocurrency exchange which has always shied away from listing too many altcoins, recently added support for Ripple’s XRP and Stellar (XLM), however, altcoin trading volume has failed to increase despite the strategy.
TradeBlock says it carried out a comprehensive analysis of all digital currencies that have a USD pair on Coinbase Pro and discovered that monthly trading volume has crashed to a two year low. “trading volume in March 2019 at Coinbase Pro recorded the lowest levels since 2017,” TradeBlock wrote.
Cryptocurrency Exchanges Raise Trading Fees
TradeBlock says it tracked trading fee schedules at several significant US accessible digital currency spot exchanges over the past five years and discovered that on average, exchanges slashed their trading fees in 2015 and 2016 volumes started increasing.
However, in 2017, fee schedules on exchanges remained unchanged even when trading activities hit an all-time high, but as volumes continued to decline in 2018 and 2019, exchanges began raising fees.
“Taker Trading fees bottomed in 2015, as crypto adoption began to rise slowly. Throughout the bull market of 2017, fees were almost unchanged, as asset prices surged massively. During this time, trading volumes at spot exchanges rose alongside price which reached an all-time high in late 2017,” declared TradeBlock.
In conclusion, the researchers have made it clear that exchanges use the extra revenue generated via fee increases to scale their operations, allocate cash resources to enable them to support more trading pairs, improve their technology, add more services such as OTC trading, lending/staking and more.
As the price of bitcoin and altcoins has started gaining bullish momentum, it remains to be seen whether 2019 will usher in another bullish surge that could make the exchanges reduce trading fees once more.