Cryptocurrency Exchange Are Some Of The Most Lucrative Businesses In The Cryptocurrency Industry, Will Poloniex's Recent Performance Open The Doors For Other Firms?
There are only a few business models in the industry that make a consistent and reliable profit, regardless of the pricing of performance of the any specific coin on the market.
Poloniex has been my absolutely favorite exchange since I originally began trading cryptocurrency, but I must admit that I did give up my search after I was on Poloniex for a few days. Poloniex in the past was always very fast, reliable, and seemed to be very professionally run and managed. While Poloniex has been recieving record level of users, volume, and trade amounts over the past few months, the site has been really struggling to keep up over the past few weeks. It has gotten to the point numerous times where it has been so slow that users can't enter into or exit positions, which is legitimately unacceptable for m any traders.
Luckily I haven't been burned by not being able to submit a trade, but I did miss numerous positions that would have been winners simply because I was unable to enter into a position. With the levels of volatility that have been present in the market recently, and delay or lag by an exchange can be absolutely devastating to traders. If there is one thing that cryptocurrency traders don't like, it is being held back by a slow or unresponsive site.
It may not seem like it but Cryptocurrency exchanges are complete cash cows, and are seeing higher profits and revenues than ever.
Over the past month Poloniex has seen higher levels of volume than ever before, and were really unprepared for the excess traffic to the platform. If both traders are 'low-level' traders who are trading under 600 BTC in a 30 day period, Poloniex brings in .4% (or 40 basis points) per trade. Even if one or both of the traders had a higher trading teir status, it is very unlikely that Poloniex recieves anything less than 15-20 basis points per trade. Not only do they get a direct cut of all currencies traded on the platform, but they also recieve 15% of the profit that lenders earn on the lending market. Over the past week Poloniex has been consistently achieving daily volumes exceeding 250,000 BTC, and when we consider that they are guaranteed to receive on average .2% of that volume, then it becomes clear just how lucrative and profitable the industry is.
Individuals and traders who have been on Poloniex for some time are likely to give Poloniex a bit of time to recover from its recent delays and poor performance, but traders are not going to wait around forever. Although there currently are no exchanges that can compete on the same level as Poloniex in terms of volume on the order books, vokume, and tight spreads. Bitrex would likely be a fine solution for small traders or those looking to enter into a long term buy and hold position on a currency, it simply could not currently support the volume and trade capacity that high value and high level traders need.
To be completely honest, I have very little experience with any other altcoin exchanges other than Poloniex, simply because I have never had any reason to. I assume that there are many other traders who have really only exclusively traded on Poloniex, but that may be changing soon if nothing changes. I know that the rise in activity on the site came rather quickly, but I would have thought and hoped that Poloniex had a more scale-able bandwidth solution in place. I have always been very impressed with Poloniex, but I would likely not remain loyal if the site doesn't improve or there was another reasonable option.
Establishment of a legal and licensed cryptocurrency exchange is not an easy or quick task, which will make it much harder for new firms to enter the industry.
I know that there are many small exchanges, exchanges in other countries, and other options available to traders, but the fact of the matter is that the high volume and high value traders prioritize safety and security very highly. While I heard rumors of Poloniex attempting to pull an 'exit scam' in the past, the fact is that they are a licensed exchange within the United States and couldn't pull something like that the same way a small and unlicensed exchange could. This is not to say that they theoretically couldn't pull an exit scam, but rather they would be unsuccessful and caught immediately. This is not the case for many other exchanges, and that is a major deterring factor for high value and volume investors.
Any firms or individuals who want to establish a cryptocurrency exchange to compete with Poloniex will need a very large amount of initial capital and time to have the possibility to become a licensed exchange. The government is very hesitant when it comes to cryptocurrency businesses, and the industry of cryptocurrency exchanges likely receive some of the most scrutiny. While I agree and understand that firms wishing to handle and facilitate high value trading need to be reliable and trustworthy, the length and complexity of the licensing process make it very difficult for new firms to be able to enter the market to provide any competition.
Although cryptocurrency is generally not an investment that institutions and major firms make, a cryptocurrency exchange seems like it could be an excellent investment for large firms wishing to get their feet wet in the industry and receive a steady revenue stream from it. Exchanges really don't have any need to keep their earnings in cryptocurrency, and could easily have all of their fees and other earnings instantly converted to their desired fiat currency. There really isn't much different between operating a cryptocurrency exchange verses any other investment platform, besides for the fact that cryptocurrency exchanges are likely much more profitable currently.
I really hope that you enjoyed this post, and as always I urge you to leave any feedback, questions, comments, or discussions below. Thanks for reading!
I have used many diferent exchanges with some very bad experiences. My worst being cryptsy lost 700 dash after they decided to dissapear. I mostly use bittrex to exchange btc-alts but I also have a poloniex account which I rarely use. Moral of the story= dont use an exchange to store any coins for any longer than it takes to trade them.
Agreed!
I hope so! Poloniex has been doing my head in!
Interesting. Followed, pls follow back. Thanks.
Very funny the Pi chip. My experience is the same, until recently Poloniex was always very fast, and reliable. I used to stay on the site for hours at a time. Now I'm sure they will build up their capacity especially since, as you say, they are doing well and getting paid.
When I ran into the slowdown, I just backed off, signed off and didn't try to stay on it. Let the important business clear. Then when I wanted to make a trade, I tried to do it during off hours for the US. Works for me. If you want to trade all day every day, well you're either a high pro or simply a bobo in a manic state!
I actually use the same tactic, and I have had to modify my strategies and tactics since the beginning of the slowdown. One of my favorite and most successful strategies has always been playing the spread and consistently taking small profit margins off of many trades. Due to the issues with Poloniex recently this strategy is simply not effective using my current hardware. I am honestly still very suprised by the fact that they didn't have a more scale-able solution for times such as this.
Well yes, but you've got to admit it has gone parabolic and exponential just in the last month or so. We knew it was going to happen but timing is the hardest to predict.
At first slowly and then suddenly the time is NOW! Now I see why you're calling for that stability to come back. It's that same race for high frequency trading, HFT is it (?) as the stock exchanges.
Honestly they might get wiped out the moment a big corporation in the financial sector decides to launch a competing platform.
Just think about it, we are putting up with lag and huge delays from Poloniex who are struggling to scale up, and so many people are storing serious money there without having any certainty that the entity behind the platform is in any way solvable or can be held accountable.
The moment a long standing, renowned Corp joins the game, I expect people will move their money there for reassurance.
Exactly. The regulations and barriers to entry would be no issue for a big financial firm, and they could likely operate a similar or better quality exchange. This would also add extra support and trust in the cryptocurrency market and exchange, and I really don't think Poloniex would stand a chance.
Hopefully Exscudo exchange will be awesome!
Its built on its own blockchain and will have its own app for ios and android. And it will let us trade forrex and crypto in one platform!!
I would use Binance https://www.binance.com/?ref=12558281. In Binance 0.1% per order. If you purchase BNB tokens (directly from Binance) your trading fees is 0.05% per order while Poloniex is 0.4%. For little traders like you and me trading cost can add up fast.