How Much Do Crypto Exchanges Make And How Do They Profit?
Cryptocurrency has been around since 2009, and its popularity has since grown. Many people have been using and investing in cryptocurrencies, which also made way for crypto exchanges. These are online platforms that allow crypto users and traders to exchange digital assets for another using the given assets' market value as their basis. A lot of cryptocurrency exchanges have emerged since the cryptocurrency was first launched 11 years ago. But for many of us, it is still a mystery how do crypto exchanges make money and how much do crypto exchanges make.
In this article, we will talk about how crypto exchange platforms work and how much money fo the crypto exchanges make. Brace yourself as we are going on a wild ride learning about crypto exchanges.
Ways On How Crypto Exchanges Earn Profits
Before we dive into learning how much do crypto exchanges make, it is vital for us to learn how they make money. Crypto Exchanges make money mainly by these factors: deposit fees, withdrawal fees, selling and buying cryptocurrencies, and avoiding downtime. Let us talk about the factors below:
If you are among those who have experienced crypto trading, you know that transactions, such as buying and selling, usually takes forever. This is one reason why several exchange platforms charge very high fees to their clients in exchange for the convenience and fast service that they offer. For example, CoinBase charges less than 2% for every crypto purchases or sales. This price will go up to around 4% if you use a credit card as it is the easiest method to use. On the other hand, Binance charges a lot lower, around .1% for the same service.
However, some crypto exchanges offer discounts to clients who trade with large volumes of digital money. It is still more profitable for them to have a prominent trader, also called day traders, with reduced fees compared to several small-time traders.
Buy and Sell
Some crypto exchanges get profit by offering terrible exchange rates. Usually, when someone buys or sells cryptocurrency, these exchanges take a cut for themselves as well. To get the best before moving their purchases to a particular platform, traders look for other crypto exchanges and shop around. But to do this, they must be registered with the exchanges. Shopping around and finding a good deal is more manageable with popular cryptocurrencies such as Bitcoin and Ethereum.
However, for others, it may be a bit challenging. Another way for exchanges to earn an additional profit is to sell their own tokens.
Time is money. Nobody wants to lose time and money. If the platform you use always experiences downtime issues, then their clients' probability of moving to a different platform is almost 100%.
Crypto exchanges will lose many of their valued customers if their platform and services do not satisfy their clients. This is why exchange platforms invest in themselves to make sure that they are continuously improving and developing their servers and services.
How Much Do Crypto Exchanges Make
Binance was the highest-earning crypto exchange in 2018. It earns approximately $3.5 million per day. The top 20 cryptocurrency exchanges make around a million US dollars per day, on average. However, only the first six in the list, namely Binance, Upbit, Huobi, Bithumb, and Okex, claim that they get more than 1 million dollars per day.
According to some reports, Binance earned more than a billion dollars in cumulative profits. On the other hand, the crypto exchanges from South Korea Upbit and Bithumb experienced more than 60% loss in profits. The Chinese-funded exchange platform Huobi, known as the fourth-biggest crypto exchange, has more than a billion-dollar trades in a day and continues to increase dramatically.
Some would even say that they earn more profit than Binance.
There are several hundreds of exchanges out there, and many of them are trading billions of dollars worth of crypto money daily. No one can tell how much do crypto exchanges make, but it is pretty sure a huge chunk of the total assets they are dealing with.
How To Start Your Crypto Exchange Business
Learning how much these exchanges can earn, it is enticing to have your own. Is it possible? Well, yes. Here are some of the essential things needed to start your very own crypto exchange.
- Hire a reliable, relevant team of lawyers to help secure the licensing requirements required.
- Look for investors who are willing to contribute money, or you can use your own money for capital to gain full ownership of the exchange.
- Establish partnerships and connections with other crypto exchanges.
- Find a trustworthy payment processor for the transactions.
- Make sure that the exchange you plan to build is secure and reliable.
- Conduct beta tests for bugs and other vulnerabilities.
- Market and promote the desired platform to target or potential clients.
- Keep on working with your lawyers in dealing with ongoing issues.
The steps above seem very easy, but it certainly does need a lot of work, a bunch of professionals, and a ton of money. The vital thing to keep in mind when you decide to build your own crypto exchange is to follow the legal guidelines. It can be challenging as one will need to deal with plenty of legal hurdles, such as International jurisdictions. But these can be overcome, not easily perhaps, but also not impossible considering the number of exchanges already in operation these days.
With all the fuss going on about cryptocurrencies and crypto exchanges these days, one cannot avoid asking, how do bitcoin exchanges make money? And how much do crypto exchanges make?
Learning how much they make (some are millions per day) would make us think it is becoming a serious business. According to Germany's largest bank, Deutsche, fiat currencies will be replaced by cryptocurrencies by 2030. Well, there is no certainty to that yet, but let's wait and see. Learn more about crypto exchanges here!
UPDATED April 1, 2021
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