Top Crypto Exchanges are Banking Billions in Profits Despite Year-Long Bitcoin Bear Market
The start of 2018 saw cryptocurrency values drop dramatically. Since then, the market has, more or less, remained largely bearish. Bitcoin, the market leader, has seen its market capitalization drop from USD 8 million to around USD 3.5 million. Notorious for their price volatility, the market capitalization evaporation still continues.
Bulls In A Bear Market
Studies have shown that in a market that is predominantly bearish, crypto exchanges are still making huge profits.
Coinbase, the largest fiat to crypto exchange, estimates revenue of around USD 1.3 billion in 2018. Ubit and Bithumb, the largest South Korean crypto exchanges, rake in about USD 100 million every month.
Transactions And Trading Fee
Crypto exchanges rely on revenue generation through charging a small amount on each trade placed and deposit/withdrawals. According to a researcher, even a small fee of 1% of trade by Bithumb, this means daily generation of USD 2.5 million from active trades of USD 2.5 billion on the platform.
Yet, the exchanges are also affected by the bear market. The recent breaches of security in Bithumb platform has seen drop of revenue from USD 100 million to around USD 70 million.
Crypto adoption is at an all time high. The bearish market is seen as an opportunity to buy cryptocurrencies at lower prices. This means that the numbers of active trades in an exchange are increasing, if not the market value. This is where the core revenue generation of the crypto exchanges comes from. Even with a small trading fee, they are still making millions.
Binance is also making a profit, despite deciding to give off its complete token listing fee to charities such as the UN.
“If you look at the first few UN Sustainable Development Goals, such as poverty, hunger, health and even education, these are easily addressed or improved by the charity initiatives.”
Changpeng Zhao, CEO Binance said,
“Yet, what we’re trying to do is a level deeper. I believe that by improving transparency in the charity sector, we will be able address all 17 goals as a whole, at a more fundamental layer.”
Through the last 11 months, the market capitalization of cryptocurrencies has halved. Yet, the increasing revenue generation has caught the interest of institutional investors. Major South Korean crypto exchanges, for example, are all operated by big conglomerates such as Kakao and Nixon.
CoinBase, the largest crypto exchange, recently saw USD 300 million investments following its series E equity round and now valued at around USD 8 billion alone.