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How Profitable Are Cryptocurrency Exchanges

Cryptocurrency Exchanges

Cryptocurrencies have weaved their way into the public spotlight within the last 10 years.  When you think of crypto currency, you think of, well, money! How exactly do cryptocurrency exchanges make money? Are they profitable? This article will outline how this concept and how these major companies are making profit.

The main and most notable way that crypto currency exchanges make money is through that of the fees and rates at which users are charged to trade the cryptocurrency.  The more the users use the specific exchange company to make trades, the more money that those companies will pocket from the fees that are charged during the transactions.  Since making their name known in 2012, Coinbase has made over 2 billion dollars alone in fees and rates, and it doesn’t stop there.  The company itself is noted to be worth 8 billion dollars.

You may be thinking that you can never own shares in large exchanges like Binance but there are actually many opportunities out there where you can become a shareholder of an exchange and earn money from the exchange. Cryptocurrency investment is highly speculative and risky but there are projects like Burstex which is an exchange where you can earn money through holding their BEX tokens. The exchange will distribute its profits to their token holders so you can earn a regular dividend by holding the token. This is a good option for you if you do not like the risk of Cryptocurrency trading but want to earn money as well.

How much are these exchange fees? Generally it is said that within centralized companies, the fee  is 0.25%.  It should be known, however, that there are usually fees for the “maker” and the “taker”.  For example, a company like Kraken charges their makers between 0.00%-0.16% while charging their takers between 0.10% and 0.26%.  It should also be noted that, typically, the takers will be charged more than the makers.

Another way that cryptocurrency exchange companies earn money is through listing fees.  Through listing fees, companies make money though “listing” the currency that is available to be exchanged.  These numbers also vary from company to company, however, larger and well known companies can charge anywhere between 1 and 3 million dollars.

Companies such as Binance and Upbit make well over 3 million dollars per day. Because of their popularity, they have a solid hold on most of the cryptocurrency exchanges. It should also be noted that Asian countries seem to contain the majority of the crypto currency exchange companies.  This is in part due to Asian countries relying heavily on online transactions.

These exchanges are also helping other projects raise funds via Initial Exchange Offerings. Even though it is unknown how much they charge for IEOs, there is no doubt that they will get some sort of financial incentive for running those on their exchange. The Crypto space is constantly changing and now there is a lot of hype around DeFi (decentralised finance) and there is no doubt exchanges are helping these projects to further boost their profits. For example, Kava, a DeFi project, raised funds on Binance.

Most companies are centralized exchanges, however decentralized companies are starting to make themselves more apparent.  With countless hacking that’s been committed within centralized exchange companies, a more peer to peer route may be the more safe and rewarding platform to use when trading cryptocurrency. While most crypto exchange companies cater to the big names like BitCoin, Litecoin and Ripple, exchange companies that offer the smaller names, can profit from a more specific population.

As you can see, crypto currency exchange is a very in demand and profitable business.  Companies rake in upwards of a million dollars each year through fees alone.  Once you account for listing prices and any other types of fees and rates, you’re looking at a multimillion dollar company and a billion dollar industry.  Cryptocurrency exchanges have a very strong hold over the trading of cryptocurrency and it seems as though these companies are only getting larger and larger as time progresses. I can’t see cryptocurrency exchanges losing the steam that they’re created over the past 10 years.  It will be interesting to see what plans are in line for these companies in the future.

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