Cryptocurrency exchanges will be tested by non-native market conditions, a decrease in client activity and problems of a number of industry participants. Some of them may go bankrupt if they are not “rescued” by firms like FTX or Alameda, Kaiko admitted.
In our latest Deep Dive, @riyad_carey covers the trouble exchanges could be in as volumes slow and fees compress.
Check it out here: https://t.co/1heLXy4SUS
— Kaiko (@KaikoData) June 23, 2022
The specialists recalled that the symptoms of a bear market are a decrease in liquidity and a reduction in trading volumes. This situation puts pressure on the financial results of crypto platforms, which generate most of their income through commissions.
According to analysts’ calculations, in recent months there has been a decrease in bitcoin trading volumes. The exception was the May surge, which was caused by the Terra collapse volatility.
Analysts also cited the reduction in fees and the problems of additional directions (staking, venture investments) as risk factors for cryptocurrency platforms.
Binance.US Decision to Zero Fees for some bitcoin pairs, it can tighten competition in the US market, where Gemini previously had the most vulnerable positions.
In a global context, experts noted a noticeable increase in the market share of FTX, which pressed Coinbase’s position. By setting a new standard for low exchange fees, Sam Bankman-Fried’s firm has grown its client base.
Specialists also drew attention to the expansion of the list of services to attract new users. The details of such products often remain opaque, they added.
In this context, the real danger comes from smaller exchanges that have lost market share. As an example, analysts cited a platform from Japan that offers up to 5% per annum on BTC, ETH and XRP. In the documents, the firm warned that “the cryptocurrencies on loan are not managed as separate funds” and there is no guarantee that users will receive a refund if it goes bankrupt.
Another worrying trend is the immersion of crypto platforms into venture capital. As confirmation, Kaiko recalled the problems with Voyager as a result of Three Arrows Capital’s liquidity difficultiesas well as Tether loans for Celsius.
Recall that Bloomberg reported that the fall of bitcoin threatened to default on $4 billion in miner loans.
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