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Will New Exchanges Be Able to Break the Crypto Exchange Monopoly?

Wed, 09/11/2019 - 13:22
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Heewon Jang
The saturation of the cryptocurrency exchange market is a countermeasure against its centralization
Will New Exchanges Be Able to Break the Crypto Exchange Monopoly?
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Monopolies are simply not good for business. As a market begins to centralize, the major players in the industry are able to control values, pricing, and supply, and often in a way that is damaging to consumers. 

Nowhere is this more evident than in the cryptocurrency industry. Though relatively nascent, the comparatively low number of exchange options for crypto traders has led to a disconcerting monopoly situation. 

Collateral damage

The centralization of the exchanges market has caused mainly problems for investors. When Mt.Gox was hacked in 2014, it alone accounted for over 70% of the Bitcoin trading in the market. 

The problems with monopolies in cryptocurrency have not changed much nowadays either. Binance for example, has grown so rapidly that it took the premier spot on CoinMarketCap (by trading volume) just six months after being founded. 

The losers in these types of situations are mainly the consumers. A market subject to monopoly enables the leading exchanges to increase fees for traders, resulting not only in lost potential profits, but in a decrease in market activity. 

Growing for change

However, in recent years, exchanges have begun to come on the market in ever-increasing numbers. There are newly minted cryptocurrency exchange platforms are beginning to create decentralization of trading across the exchanges space, alongside new features, competitive fees, and better customer service. 

In terms of features, these new exchanges are offering remarkable benefits for traders and cryptocurrency developers alike. One such example is BiKi, a Singapore-based firm which launched last year during the so-called crypto winter. 

BiKi has differentiated itself by offering a comprehensive solution for new coin additions to their platform. In particular, the company has created substantial relationships with major Chinese crypto news platforms, as well as developing a massive base of 200,000 strong WeChat followers. 

Together, it enables the exchange to penetrate the Chinese markets with new exclusive, that weren't available on any other exchange to date. Due to those reasons, the platform has witnessed dramatic growth as well, recently reaching the 5th position by trading volumes according to CoinMarketCap. 

But BiKi isn’t the only solution. Cobinhood, for example, an exchange based in Hong Kong, has begun offering completely free trades, made possible by a more streamlined platform. Roger Ver’s has taken it a step further by offering ‘negative fees’. Meaning, traders can actually earn Bitcoin Cash (BCH) for every trade, creating big incentives for traders to join the platform. 

Why it matters

This movement toward a proliferation of exchanges has resulted in a decentralization of the exchange market. Investors and traders are able to pick and choose among the new exchanges for features that will best suit their portfolio. 

Not only it provides traders with greater flexibility, but it also creates newfound space for the market to flourish. New cryptocurrencies are able to be listed on exchanges faster and reach wider audiences quickly than ever before. Plus, with solutions like the BiKi and its Chinese public relations powerhouse, international investment has never been easier to attract. 

Additionally, the new competition in the space has led to far greater consumer safety for traders. The bigger the distribution of trading volumes between exchanges, the harder it is to target a 'big fish' if you're a hacker. Traders and investors are also able to diversify their investments into a number of exchanges. 

With new exchanges launching every day and new features being added, the cryptocurrency industry is finally beginning to mature, and perhaps, hopefully, will manage to increase competition and spread more value across the stakeholders and traders.

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About the author

Heewon Jang is a freelance journalist and the editor of CryptoGags section.
She is responsible for entertaining crypto content and bitcoin humour