Lower-Rated Crypto Exchanges Gained Market Share During 2018 Bear Market, Cause for Concerns?
- Low quality crypto exchanges prformed very well in the last year
- High quality crypto platforms lost part of their market share against smaller exchanges
Cryptocurrency exchanges have been expanding in the industry and they have proven to be very profitable for their owners.
However, there are different kinds of exchanges according to their services, liquidity, fees and security. Some of these exchanges tend to inflate volume in order to attract a larger number of users. Apparently, in 2018, “low quality” crypto exchanges have experienced a very positive year.
“Low Quality” Crypto Exchanges Experienced Good Year
According to a recent report released by CryptoCompare, the trading volume of exchanges with low gade ratings increased throughout 2018 and 2019. CryptoCompare has rated diffferent virtual currency exchanges from AA to F. For exmaple, there are just five exchanges with the top and exclusive AA rating, including Coinbase.
In 2017 and the first half of 2018, cryptocurrency exchanges with low grades didn’t have a large market share, but in the second half of 2018 and the first part of 2019 these exchanges started to increase their volume and have a larger share of the market.
The report reads as follows:
“By applying our current exchange grading system to historical volumes, we can show that lower quality exchanges have gained market share in the last year.”
As per Cryptocompare, this is an ill-effect of the bear market that the cryptocurrency market experienced in 2018, which is also known as the “crypto-winter.” One of the factors that helped this trend grow is related to a “dwindling customer base.”
This makes reference to customers that viewed virtual currencies as an incestment tool. Moreover, there was a “crhonic over supply,” that affected the market throughout 2017 when Initial Coin Offerings (ICOs) were expanding in the market.
Other techniques applied by crypto exchanges such as Trans-Fee Mining (TFM) allowed them to boost volumes and gather the attention of other users. Since that moment, fake volume became a growing trend in the crypto market, and something that affected the whole space.